Small Business Doctor

Our culture values specialization. Having specialized skills often leads to outsized material benefits. It also often results in praise and social status. Consider the social recognition that would be given to a medical doctor who is a primary care family medicine doctor compared to that given to an orthopedic surgeon. They are both highly educated, […]

What Are Transaction Costs? Transaction costs are often overlooked in economics and textbook finance. In real life economics, however, they play a very significant role. In corporate finance, you can see many of a company’s transaction costs located in the selling and administrative categories within the Selling, General and Administrative (SG&A) section of their Income […]

Selling, General or Administrative Expenses One way to see how economic transaction costs are internalized within a company is in the SG&A Expense lines of a company’s income statement. All of the selling and administrative expenses are internalized transaction costs, and so is the insurance expense within the general expenses category. This is not the […]

Company Size and Corporate Strategy Company size is a strategic decision. This decision, like all corporate strategy decision, is made by examining a company or nonprofit organization’s external environment. Coase’s theory of the firm tells us that big companies are big because they have decided to take in-house tasks that could otherwise have been performed […]

Yes, big companies are incentivized to favor mass migration. Why? Why are some companies very big? Coase’s theory of the firm tells us that companies exist because of transaction costs in the economy. Transaction costs are costs between two economic entities. Let’s say you’re going to buy a house. The amount that you pay as […]