The Division of Labor and the Firm: An Austrian Attempt at Explaining the Firm in the Market
Quarterly Journal of Austrian Economics, Vol. 14, No. 2, pp. 188-215, 2011
16 Pages Posted: 7 Nov 2010 Last revised: 16 Aug 2013
Date Written: October 6, 2010
This paper reviews Austrian approaches to the firm and drafts a theory that emphasizes the firm as a market phenomenon. Here the firm is a vehicle for imaginative entrepreneurs to create artificially high factor density, thereby increasing its internal “extent of the market” to support specialization of factors beyond the general level of division of labor in the market. The firm therefore becomes a product of, and prospective catalyst for progressing the market’s overall division of labor, and the firm emerges as an entrepreneur-generated means toward increased efficiency and more roundabout production. It consequently may play a crucial role in the evolution of market structure and, by extension, the development of civilization.
Keywords: Austrian economics, theory of the firm, division of labor, specialization, market structure
JEL Classification: L22, L23, L26
Suggested Citation: Suggested Citation