Why firms exist
Compare market exchange with coordination inside a firm.
If markets coordinate exchange, why use a firm? Imagine producing a short film and renegotiating every shot with a new team. A continuing organisation can coordinate tasks internally, but it also creates management costs.
Owners, managers, and employees need not be the same people. Their goals may overlap or conflict. Saying “the firm decided” can conceal who made a decision and on what basis.
Size does not guarantee efficiency. Scale may help while slow decisions or distorted communication hurt. Examine competition outside the firm and incentives, information, and error detection inside it.
Make your understanding visible
Compare outsourcing one poster with employing a continuing designer: one benefit and cost each.
Compare with a reference response
Outsourcing is flexible but requires repeated briefing and acceptance. A continuing designer knows the work but creates ongoing cost and management obligations. Volume and uncertainty affect the choice.