How small can beat big in business

I am starting to read with interest the Coaseanfloor blog.

Reading the work of Ronald Coase whilst at Henley, made me realise the rationale for setting up big businesses in the first place – the whole issue of transaction costs. Big companies started undertaking activities in-house because it was cheaper to do so, i.e. the external transaction costs were high. But many companies now have high internal transaction costs, just think of big posh offices, salaried partners and Directors, these push up the cost of conducting these activities in-house.

Transaction Costs

As an Accountant, I would naturally say that you look for value for money from each function and that if you can source it more cheaply, then you owe it to your shareholders to do so. Outsourcing to India can be a solution, but my belief is that you engage the large number of independent professionals and specialists to create a virtual team or department – these people are commonly more experienced and cheaper, as many of them work from home.

At Jiva, we are looking to make technology help in this process. The internet is an obvious way of finding these people and using their services. Our view is that accessible profiles, reputational management and online communication is at the core of the solution – and we are well on track to start making this happen.

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