Abstract

A firm is a market contradiction: as a firm grows, the market shrinks. The basis of this statement are theoretical approaches, which are called theories of the company. This work is aimed at determining the boundaries of the company in a dynamic perspective with the aim of finding effective solutions to the process of its growth. The study notes that opportunism as a behavioral factor, as Williamson noted, incurs significant operating costs that encourage the firm to change its boundaries. Therefore, the work focuses on this factor to create a systematic image and a general theoretical basis for changes that affect the size of the company. The main objective of the study is to determine the relationship between the opportunistic behavior of economic agents and the internal and external growth of the company. The author notes that opportunism is an unlawful behavior, often taking place in a double relationship between two legally independent parties and is a consequence of external and internal uncertainty and information asymmetry. The study postulates that the concept of trust, information transparency, or information balance between parties remains a dream for both theorists and practitioners. It has been ascertained that information transparency and a complete understanding between economic entities are difficult to implement in the context of the priority role of personal good over public or, at least, mutually beneficial. The results of the study confirmed the influences of opportunistic actions of economic entities, as predicted in the framework of transaction costs theory, the organizational changes of a company, its scale. The study made it possible to justify the presence of a positive effect of illegal actions on the internal expansion of the company and the negative, expanding the external structure.

Keywords: Sourcing, External Relationships, Internal Relationships, Opportunism.

JEL Classification: D21, D23, L22, L25.

Cite as: Nemmiche, K., Nassour Ab., Bouchetara, M. (2019). Firm growth vs. external growth: a behavioral approach. Financial Markets, Institutions and Risks, 3(4), 16-23. http://doi.org/10.21272/fmir.3(4).16-23.2019.

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