Power, Ownership and Entity: Some Issues on the Nature of the (Network) Firm

Abstract:     
The firm was evicted from economic analysis for a long time. It appeared as a particular and substantial "scope" thanks to the economist R.H. Coase at the end of the 1930'S but sunk into oblivion for three decades. This paper deals with the 1970's renewal of interest in the theory of the firm, particularly from the development of new institutional economics. But we argue that these contractual approaches need to be refined by considering - as Rajan and Zingales argue - the impacts of "financial revolution" and of the valuation of human capital on firm performance. Some alternative theories - based on critical resources or competences - become more and more evident to analyze the nature and the boundaries of the firm. This one conceals - beyond the metaphor of the "nexus of contracts" - the features of a real "organizational entity". In this article, we want to shed light on the crossed-fertilization effects between these theories in order to raise the issue of the boundaries of the firm and to dissociate the legal and economic nature of the firm. It is hence suitable to deal with the theoretical analysis of the network-firm. The characterization of this complex organizational form, which is coordinated by a "hub-firm" that has a power over other legally independent firms without recourse to equity ownership, allows us to reveal both the nature of interfirm cooperation and its implications on the theory of the firm. Finally, we propose a conception of the firm based on power.

Number of Pages in PDF File: 1

Keywords: Theories of the Firm, Organizational Entity, Power, Critical Resources, Network-Firm

JEL Classification: D23, L22, L23

working papers series