This paper develops a general equilibrium model with consumer-producer
s, economies of specialization, and transaction costs to investigate t
he emergence of firms from the division of labor and the function of a
structure of residual rights. It is shown that the institution of the
firm can be used to get intangible intellectual property involved in
the division of labor while avoiding its direct pricing and marketing,
so that the division of labor can be promoted by saving on transactio
n costs.