Outsourcing key to optimal enterprise size and cost efficiency.
The article explores how companies can determine the best size for their operations by considering outsourcing and transaction costs. The researchers found that the optimal size of a company is when the production volume reaches a point where the cost of transactions decreases until it reaches zero. Companies should focus on what makes them unique and outsource tasks that others can do more efficiently. Increasing production size can lead to higher transaction costs, such as monitoring and control expenses. This study shows that modern companies prioritize their core activities and outsource tasks that are not essential to their identity and production process.