The Theory of the Firm in a Contractual Perspective (La Teoria Dell'Impresa in una Prospettiva Contrattuale ) (Italian)

14 Pages Posted: 27 Jan 2011

Date Written: November 16, 2000

Abstract

Starting from the Contribution from Ronald Coase, the modern theoretical literature tends to identify the firm with the hierarchic coordination of the workforce, opposed to the coordination of the production factors operated by the market.

Other authors prefer to concentrate on the entrepreneur instead of the firm. Starting from the organization put in place by the entrepreneur, they find that the price mechanism operates also within the firm (employees engage themselves through contracts to execute the orders of the entrepreneur), and that the hierarchic principle operates also with reference to market exchanges through the price mechanism (the entrepreneur coordinates the production factors also when she buys them on the market).

Since either the market and the firm are contractual arrangements, it is more useful to concentrate the attention on the modalities with which the entrepreneur conducts her organizing (and necessarily contractual) activity.

The contribution of those who stress the contractual nature of the firm allows to place the theory of the firm within the point of view of the neoclassical economists, according to whom the economic function of the firm is to ensure productive specialization and the interdependence of economic actors, something which does not ensue from the vision of the firm as the means to optimize transaction costs.

A decrease in the latter (that is, in the cost of functioning of the price mechanism) would entail not a substitution of the market for the firm but an increase in the number of firms through a higher production specialization. Contrary to what assumed by Coase, the correlation of firms and market exchanges is positive.

Note: Downloadable document is in Italian.

Keywords: Theory of the firm, Ronald Coase

JEL Classification: D23, K12, L22

Suggested Citation

Santella, Paolo, The Theory of the Firm in a Contractual Perspective (La Teoria Dell'Impresa in una Prospettiva Contrattuale ) (Italian) (November 16, 2000). Available at SSRN: https://ssrn.com/abstract=1748585 or http://dx.doi.org/10.2139/ssrn.1748585

Paolo Santella (Contact Author)

Single Resolution Board

Rue de la Science 27
Bruxelles, 1000
Belgium

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