The Emergence of the Modern Theory of the Firm

SMG Working Paper No. 1/2006

63 Pages Posted: 23 Apr 2007

See all articles by Nicolai J. Foss

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation

Peter G. Klein

Baylor University - Hankamer School of Business; Norwegian School of Economics (NHH) - Department of Strategy and Management; Ludwig von Mises Institute

Date Written: January 2006

Abstract

We discuss the emergence of the theory of the firm (in the Coasian sense); survey and discuss the main currents of the theory of the firm, and discuss what has determined the emergence of the theory of the firm. We argue that advances in the theory of the firm have been strongly influenced by conceptual innovations in (mainstream) economics in general and by the ongoing division of labour in economics in tandem with a recognition of the importance of a number of empirical anomalies. The substantive borrowing from neighbouring disciplines, such as business history, law, psychology, organizational sociology and business administration has been relatively limited and ad hoc (although some scholars, notably Williamson, have made more substantive use of these disciplines than others). The fact that the theory of the firm has stayed relatively close in to the (changing) economic mainstream and that its substantive borrowing from neighbouring disciplines has been relatively limited underlie and explain much of the "external" critique of the theory (i.e., the critiques of sociologists, heterodox economists and management scholars).

Keywords: The theory of the firm, economic organization

JEL Classification: B2, B40, D21, D23, L2

Suggested Citation

Foss, Nicolai J. and Klein, Peter G., The Emergence of the Modern Theory of the Firm (January 2006). SMG Working Paper No. 1/2006, Available at SSRN: https://ssrn.com/abstract=982094 or http://dx.doi.org/10.2139/ssrn.982094

Nicolai J. Foss (Contact Author)

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilen
Frederiksberg, 2000
Denmark

Peter G. Klein

Baylor University - Hankamer School of Business ( email )

Waco, TX 76798
United States
254-710-4903 (Phone)

Norwegian School of Economics (NHH) - Department of Strategy and Management ( email )

Breiviksveien 40
N-5045 Bergen
Norway

Ludwig von Mises Institute ( email )

Auburn, AL
United States

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