The paper by Oliver Hart and John Moore, published in *The Journal of Political Economy* in 1990, explores the nature of firms and the transactions that occur within them. The authors identify a firm as the set of assets controlled by its owners and argue that the key difference between owning a firm (integration) and contracting for services from another party (nonintegration) lies in the ability to selectively fire workers. Under integration, owners can fire specific workers, whereas under nonintegration, they can only "fire" the entire firm. This framework is used to study how changes in ownership affect the incentives of employees and owner-managers. The authors build on the ideas of Williamson and Klein et al., who observed that firms are important when parties must make specific investments, and that the quasi-rents from these investments cannot be divided in advance due to the difficulty of writing detailed long-term contracts. They argue that integration reduces opportunistic behavior and holdup problems but also brings costs and benefits. The costs and benefits of integration are two sides of the same coin: while integration increases the owner's freedom of action and share of surplus, it decreases the non-owner's share. The paper formalizes these ideas using a model where agents take actions today that affect their productivity or value tomorrow. The model assumes that contracts are incomplete and subject to renegotiation, and that asset specificity means that an agent's marketability depends on which assets they have access to. The authors use this model to illustrate that it is efficient for a firm to produce services in-house if the service is specific to the firm and its customers, rather than contracting outside through the market. The paper concludes with a discussion of the robustness of their results and provides a partial characterization of an optimal control structure, suggesting that ownership should be concentrated in the hands of agents who are indispensable to the firm's assets. This insight has implications for understanding the boundaries of firms and the nature of partnerships and cooperatives.The paper by Oliver Hart and John Moore, published in *The Journal of Political Economy* in 1990, explores the nature of firms and the transactions that occur within them. The authors identify a firm as the set of assets controlled by its owners and argue that the key difference between owning a firm (integration) and contracting for services from another party (nonintegration) lies in the ability to selectively fire workers. Under integration, owners can fire specific workers, whereas under nonintegration, they can only "fire" the entire firm. This framework is used to study how changes in ownership affect the incentives of employees and owner-managers. The authors build on the ideas of Williamson and Klein et al., who observed that firms are important when parties must make specific investments, and that the quasi-rents from these investments cannot be divided in advance due to the difficulty of writing detailed long-term contracts. They argue that integration reduces opportunistic behavior and holdup problems but also brings costs and benefits. The costs and benefits of integration are two sides of the same coin: while integration increases the owner's freedom of action and share of surplus, it decreases the non-owner's share. The paper formalizes these ideas using a model where agents take actions today that affect their productivity or value tomorrow. The model assumes that contracts are incomplete and subject to renegotiation, and that asset specificity means that an agent's marketability depends on which assets they have access to. The authors use this model to illustrate that it is efficient for a firm to produce services in-house if the service is specific to the firm and its customers, rather than contracting outside through the market. The paper concludes with a discussion of the robustness of their results and provides a partial characterization of an optimal control structure, suggesting that ownership should be concentrated in the hands of agents who are indispensable to the firm's assets. This insight has implications for understanding the boundaries of firms and the nature of partnerships and cooperatives.