Vertical integration: applying an economic calculus to knowledge
by Herman A. Van Den Berg
International Journal of Learning and Intellectual Capital (IJLIC), Vol. 8, No. 4, 2011

Abstract: This paper applies an economic calculus to knowledge to address one of the most strategically important questions firms face Рdeciding which activities are more economically organised in a unified firm rather than in two autonomous firms. The conceptual and empirical framework presented here proposes that specialisation leads to differences in cost and technical efficiency of knowledge-based factors of production between adjacent stages in a value chain. These divergent costs and technical efficiencies in turn shape the economics of inter-firm boundary location. A number of dimensions are suggested as being useful for distinguishing between the tacit, codified and encapsulated forms of productive knowledge inputs. Knowledge, so classified, is substituted for labour and capital as factors of production in the traditional microeconomic isocost-isoquant model. This paper applies 'an economic calculus to knowledge' [Simon, (1999), p.34] by using ''…marginal rates of substitution between one form of knowledge and another'' [Simon, (1999), p.24].

Online publication date: Thu, 27-Nov-2014

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Learning and Intellectual Capital (IJLIC):
Login with your Inderscience username and password:

    Username:        Password:         

Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email