Theories of the Firm

Abstract

Recent works on the theory of the firm have demonstrated how difficult it is to fully grasp and qualify this subject (L. Putterman, 1986; G.C. Archibald, 1987; B.R. Holsmtrom-J. Tirole, 1989). It is presented as a juxtaposition of different subjects since “obviously, no single model or theory will capture all elements of the puzzle” (B.R. Holmstrom — J. Tirole, 1989, p. 65). The suggested subjects are supposed to integrate the empirical aspects lacking in the abstract notion of the firm necessary to the coherence of the theory of value. Among the privileged subjects, emphasis is generally placed on the recent evolution of the theory of the firm towards the organizational nature of the phenomenon. The latter exhibits two main dimensions: the internal organization of the firm and the relationship of the firm with the market. The need to describe the nature and the boundaries of the firm is thus underlined by B.R. Holmstrom and J. Tirole (1989, pp. 65–66): “One needs to explain both why firms exist as well as why all transactions are not organized within a single firm”.