Discuss this strategy as an optimal response to change

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As noted in Chapter 2, one response of firms to increasing corporate liability for hazardous activities has been to spin off such activities to subsidiary firms whose liability is limited (Ringleb and Wiggins 1990). In other words, the firm replaces an internal transaction with a market transaction. Discuss this strategy as an optimal response to a change in the costs of organization relative to the costs of enforcing contracts.

Reference no: EM131227442

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