Nicolai’s “what can’t be achieved with a group under a big roof” resonates with me on this topic.

Here is an attempt at an answer, following Selznick’s Leadership in Administration, which makes the distinction between organizations and institutions.

If identifying with a firm for non-pecuniary reasons (loyalty, clanship, tribalism) leads to lower cooperation costs then establishing a institution is more efficient than using the market.

The lower cooperation costs can come from reducing the level of self-interest to the “greater good” of the firm. Institutions can also lower coordination costs by establishing a common language but this could also occur under the big roof (or big tent as I like to call it).

Thoughts?

I believe that is the position also of:

Williamson (1985) Institutions of Capitalism
Foss (1996) Organization Science
Mahoney (2001) Journal of Management