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Why companies exist (Coase)
Manuel Deó
August 20, 2026
I was reading a very good economics book this week.
Dangerous, I know.
The kind of thing that can make you say “transaction costs” at dinner and lose friends.
The book is The Firm, the Market, and the Law, by Ronald Coase.
Coase asked a beautifully simple question:
If markets are so efficient, why do companies exist?
Why not buy everything outside?
Every task.
Every service.
Every tiny thing.
Need a contract reviewed?
Market.
Need a lawyer?
Market.
Need someone to explain why Procurement has become a lifestyle?
Also market.
Coase’s answer was transaction costs.
Finding people costs time.
Explaining context costs time.
Negotiating costs time.
Checking quality costs time.
Managing the relationship costs time.
Sometimes doing things inside is cheaper.
Sometimes buying outside is smarter.
The point is not ideology.
The point is friction.
Legal still gets trapped in the old question:
Should we hire?
Or send it to a law firm?
Inside or outside.
Permanent or external.
Very neat.
Very incomplete.
Because modern legal work often sits in the middle.
Too senior for junior delivery.
Too temporary for a permanent hire.
Too close to the business for a traditional firm.
Too urgent for a six-week procurement safari.
That is where the model matters.
At Ambar, we help GCs reduce the friction of accessing senior legal judgment.
Fractional lawyers who can get close to the business, understand context quickly and work under the GC’s agenda.
Because the future of Legal is not “inside” or “outside”.
It is knowing where the friction disappears.
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Dr. No |