Correlation between company's size and its boundaries

The article reveals reasons for a company’s desire to grow and shows some of the advantages and limitations of the large firms in comparison to the small ones. In the article, theoretical statements are supported by several practical cases exemplifying enlargement of the Russian vertically integrated structures. The author defines the difference between such categories as “size” and “borders” of the firm. This concept is not popular among the authors writing on the institutional theory of the firm. Rather frequently the terms “size” and “borders” are used as synonyms. The author also demonstrates a number of possible ways instrumental in designing boundaries of the firm. There are two ways of the company’s size enlargement: with or without changes of its boundaries. The correlation between these ways of the company’s’ development and transformation and transaction costs was established. The author concludes that there are some limitations affecting the use of each way of development. This conclusion allows the author to answer one pressing question of the institutional theory: “Why aren’t all transactions made within firms?” - and, therefore, confirm the thesis that there are limits to the growth of the company.