SKIN IN THE GAME and The reasons for firms to exist.
The great Ronald Coase, in 1937, came up with the theory of the firm which “offered an economic explanation of why individuals choose to form partnerships, companies and other business entities rather than trading bilaterally through contracts on a market.” His idea is that there are costs to having firms but that transaction costs are lower within a firm, by which he meant cost of searching, bargaining time, secrets, etc. These are supposed to outweigh some the benefits of competition. So competition works, but it is optimal to have firms competing than just smaller units.
+ A simple extension related to SITM: firms exist because employees have more skin in the game as they have more to lose in some situations. For instance, a contractor has many clients, an employee is the equivalent of a person with a single client. You can have a complicated chain where one supplier can put you in trouble because another supplier is now frozen. The supplier cares about you but he has other clients and doesn’t need ALL of them to be satisfied, just MOST of them (not even).
+ In fact employees are rather insecure and although they may have slack and inefficiencies, they are more dependent precisely because they are inefficient and after years of employment are no longer able to work independent of a protector of job security. So it is this insecurity that makes them loyal, and escape the ubercompetitive system of contracts.
+Great literature beyond Coase: Alchian, Dempsetz, Williamson, etc. This idea came to me listening to a podcast by Russel Roberts.
+ Relational vs Transactional capitalism.

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