Buckley and Casson (1995)

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Costs of internalisation

There are also costs of internalisation, including:

1. Some costs of operating in a market are fixed independently of the volume of transactions, so if the single external market is split up and internalised, then it might cost more (similar to buying in bulk, rather than buying the parts separately)
2. If an external market is replaced by several internal ones, some of these new markets may be less efficient and may be harder to co-ordinate
3. There may be communication costs, as there are more flows of information than in an external market