A growing body of literature suggests that Transaction Costs Economics (TCE) and Resource Based Theory (RBT) of the firm are distinct, yet complementary, in their ability to explain firm boundary decisions. We suggest that an increased integration of their theoretical logic warrants consideration and thus develop a theoretical argument and hypotheses that focus on the interaction between TCE and RBT. We test our hypotheses with firm-level panel data from 155 IOU electric utility firms over nine years. Controlling for traditional TCE variables, we find a significant amount of variance in vertical disintegration is explained by firm-level characteristics; specifically, dynamic capabilities related to managing firm-specific uncertainties, and those harvested from firm-specific IT investments. Our study is unique in corroborating mechanisms where TCE and RBT interact.

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