It offered an economic explanation of why individuals choose to form partnerships, companies, and other business entities rather than trading bilaterally through contracts on a market.
"[1] The article argues that firms emerge because they are better equipped to deal with the transaction costs inherent in production and exchange than individuals are.
[8] The traditional economic theory of the time suggested that, because the market is "efficient" (that is, those who are best at providing each good or service most cheaply are already doing so), it should always be cheaper to contract out than to hire.
His paper provided a breakthrough on the significance of transaction costs and property rights for the institutional structure and functioning of the economy.
[9] The paper has had an outsized impact on the field of microeconomics, particularly in essentially inventing the body of research that deals with the theory of the firm.
In particular, Benkler considers the commons-based peer production a third alternative coordination mechanism for economic transactions besides the dichotomy composed of markets and hierarchies.