Theory of the firm

The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or
corporation, including its existence, behavior, structure, and relationship to themarket.[1]

Contents
Overview
Background
Transaction cost theory
Reconsiderations of transaction cost theory
Managerial and behavioural theories
Behavioural approach
Team production
Asset specificity
Firm economies
Other models
Grossman-Hart-Moore theory
See also
Notes
References
Further reading

Overview
In simplified terms, the theory of the firm aims to answer these questions:

1. Existence. Why do firms emerge? Why are not all transactions in the economy mediated over the market?
2. Boundaries. Why is the boundary between firms and the market located exactly there with relation to size and output
variety? Which transactions are performed internally and which are negotiated on the market?
3. Organization. Why are firms structured in such a specific way
, for example as to hierarchy or decentralization? What
is the interplay of formal and informal relationships?
4. Heterogeneity of firm actions/performances. What drives dif
ferent actions and performances of firms?
[2]
5. Evidence. What tests are there for respective theories of the firm?
Firms exist as an alternative system to the market-price mechanism when it is more ficient
ef to produce in a non-market environment.
For example, in a labor market, it might be very difficult or costly for firms or organizations to engage in production when they have
to hire and fire their workers depending on demand/supply conditions. It might also be costly for employees to shift companies every
day looking for better alternatives. Similarly, it may be costly for companies to find new suppliers daily. Thus, firms engage in a
long-term contract with their employees or a long-term contract with suppliers to minimize the cost or maximize the value of
property rights.[3][4][5]

Background
The First World War period saw change of emphasis in economic theory away from industry-level analysis which mainly included
analyzing markets to analysis at the level of the firm, as it became increasingly clear that perfect competition was no longer an
adequate model of how firms behaved. Economic theory until then had focused on trying to understand markets alone and there had
been little study on understanding why firms or organisations exist. Markets are guided by prices and quality as illustrated by
vegetable markets where a buyer is free to switch sellers in an exchange.

The need for a revised theory of the firm was emphasized by empirical studies by Adolf Berle and Gardiner Means, who made it
clear that ownership of a typical American corporation is spread over a wide number of shareholders, leaving control in the hands of
managers who own very little equity themselves.[6] R. L. Hall and Charles J. Hitch found that executives made decisions by rule of
thumb rather than in the marginalist way.[7]

Transaction cost theory

According to Ronald Coase,
people begin to organise their
production in firms when the
transaction cost of
coordinating production
through the market exchange,
given imperfect information, is
greater than within the firm.[3]

Ronald Coase set out his

transaction cost theory of the
firm in 1937, making it one of
the first (neo-classical)
attempts to define the firm
theoretically in relation to the
The model shows institutions and market as a possible form of organization to
market.[3] One aspect of its coordinate economic transactions. When the external transaction costs are higher
'neoclassicism' lies in than the internal transaction costs, the company will grow
. If the external transaction
presenting an explanation of costs are lower than the internal transaction costs the company will be downsized by
the firm consistent with outsourcing, for example.
constant returns to scale, rather
than relying on increasing
returns to scale.[8] Another is in defining a firm in a manner which is both realistic and compatible with the idea of substitution at the
margin, so instruments of conventional economic analysis apply. He notes that a firm’s interactions with the market may not be under
its control (for instance because of sales taxes), but its internal allocation of resources are: “Within a firm, … market transactions are
eliminated and in place of the complicated market structure with exchange transactions is substituted the entrepreneur … who directs
production.” He asks why alternative methods of production (such as the price mechanism and economic planning), could not either
achieve all production, so that either firms use internal prices for all their production, or one big firm runs the entire economy
.

Coase begins from the standpoint that markets could in theory carry out all production, and that what needs to be explained is the
existence of the firm, with its "distinguishing mark … [of] the supersession of the price mechanism." Coase identifies some reasons
why firms might arise, and dismisses each as unimportant:

1. if some people prefer to work under direction and are prepared to pay for the privilege (but this is unlikely);
2. if some people prefer to direct others and are prepared to pay for this (but generally people are paid more to direct
others);
3. if purchasers prefer goods produced by firms.
Instead, for Coase the main reason to establish a firm is to avoid some of the transaction costs of using the price mechanism. These
include discovering relevant prices (which can be reduced but not eliminated by purchasing this information through specialists), as
well as the costs of negotiating and writing enforceable contracts for each transaction (which can be large if there is uncertainty).
Moreover, contracts in an uncertain world will necessarily be incomplete and have to be frequently re-negotiated. The costs of
haggling about division of surplus, particularly if there isasymmetric informationand asset specificity, may be considerable.

If a firm operated internally under the market system, many contracts would be required (for instance, even for procuring a pen or
delivering a presentation). In contrast, a real firm has very few (though much more complex) contracts, such as defining a manager's
power of direction over employees, in exchange for which the employee is paid. These kinds of contracts are drawn up in situations
of uncertainty, in particular for relationships which last long periods of time. Such a situation runs counter to neo-classical economic
theory. The neo-classical market is instantaneous, forbidding the development of extended agent-principal (employee-manager)
relationships, of planning, and of trust. Coase concludes that “a firm is likely therefore to emerge in those cases where a very short-
term contract would be unsatisfactory”, and that “it seems improbable that a firm would emer
ge without the existence of uncertainty”.

He notes that government measures relating to the market (sales taxes, rationing, price controls) tend to increase the size of firms,
since firms internally would not be subject to such transaction costs. Thus, Coase defines the firm as "the system of relationships
which comes into existence when the direction of resources is dependent on the entrepreneur." We can therefore think of a firm as
getting larger or smaller based on whether the entrepreneur organises more or fewer transactions.

The question then arises of what determines the size of the firm; why does the entrepreneur organise the transactions he does, why no
more or less? Since the reason for the firm's being is to have lower costs than the market, the upper limit on the firm's size is set by
costs rising to the point where internalising an additional transaction equals the cost of making that transaction in the market. (At the
lower limit, the firm’s costs exceed the market’s costs, and it does not come into existence.) In practice, diminishing returns to
management contribute most to raising the costs of organising a large firm, particularly in large firms with many different plants and
differing internal transactions (such as aconglomerate), or if the relevant prices change frequently.

Coase concludes by saying that the size of the firm is dependent on the costs of using the price mechanism, and on the costs of
organisation of other entrepreneurs. These two factors together determine how many products a firm produces and how much of
each.[9]

Reconsiderations of transaction cost theory

According to Louis Putterman, most economists accept distinction between intra-firm and interfirm transaction but also that the two
shade into each other; the extent of a firm is not simply defined by its capital stock.[10] George Barclay Richardson for example,
notes that a rigid distinction fails because of the existence of intermediate forms between firm and market such as inter-firm co-
operation.[11]

Klein (1983) asserts that “Economists now recognise that such a sharp distinction does not exist and that it is useful to consider also
transactions occurring within the firm as representing market (contractual) relationships.” The costs involved in such transactions that
are within a firm or even between the firms are thetransaction costs.

Ultimately, whether the firm constitutes a domain of bureaucratic direction that is shielded from market forces or simply “a legal
fiction”, “a nexus for a set of contracting relationships among individuals” (as Jensen and Meckling put it) is “a function of the
[12]
completeness of markets and the ability of market forces to penetrate intra-firm relationships”.

Managerial and behavioural theories

It was only in the 1960s that the neo-classical theory of the firm was seriously challenged by alternatives such as managerial and
behavioral theories. Managerial theories of the firm, as developed by William Baumol (1959 and 1962), Robin Marris (1964) and
Oliver E. Williamson (1966), suggest that managers would seek to maximise their ownutility and consider the implications of this for
firm behavior in contrast to the profit-maximising case. (Baumol suggested that managers’ interests are best served by maximising
sales after achieving a minimum level of profit which satisfies shareholders.) More recently this has developed into ‘principal–agent’
analysis (e.g., Spence and Zeckhauser[13] and Ross (1973) on problems of contracting with asymmetric information) which models a
widely applicable case where a principal (a shareholder or firm for example) cannot costlessly infer how an agent (a manager or
supplier, say) is behaving. This may arise either because the agent has greater expertise or knowledge than the principal, or because
the principal cannot directly observe the agent’s actions; it is asymmetric information which leads to a problem of moral hazard. This
means that to an extent managers can pursue their own interests. Traditional managerial models typically assume that managers,
instead of maximising profit, maximise a simple objective utility function (this may include salary, perks, security, power, prestige)
subject to an arbitrarily given profit constraint (profitsatisficing).

Behavioural approach
The behavioural approach, as developed in particular by Richard Cyert and James G. March of the Carnegie School places emphasis
on explaining how decisions are taken within the firm, and goes well beyond neoclassical economics.[14] Much of this depended on
Herbert A. Simon’s work in the 1950s concerning behaviour in situations of uncertainty, which argued that “people possess limited
cognitive ability and so can exercise only ‘bounded rationality’ when making decisions in complex, uncertain situations”. Thus
individuals and groups tend to "satisfice"—that is, to attempt to attain realistic goals, rather than maximize a utility or profit function.
Cyert and March argued that the firm cannot be regarded as a monolith, because different individuals and groups within it have their
own aspirations and conflicting interests, and that firm behaviour is the weighted outcome of these conflicts. Organisational
mechanisms (such as "satisficing" and sequential decision-taking) exist to maintain conflict at levels that are not unacceptably
detrimental. Compared to ideal state of productive ef
ficiency, there is organisational slack (Leibenstein’s X-inefficiency).

Team production
Armen Alchian and Harold Demsetz's analysis of team production extends and clarifies earlier work by Coase.[15] Thus according to
them the firm emerges because extra output is provided by team production, but that the success of this depends on being able to
manage the team so that metering problems (it is costly to measure the marginal outputs of the co-operating inputs for reward
purposes) and attendant shirking (the moral hazard problem) can be overcome, by estimating marginal productivity by observing or
specifying input behaviour. Such monitoring as is therefore necessary, however, can only be encouraged effectively if the monitor is
the recipient of the activity’s residual income (otherwise the monitor herself would have to be monitored, ad infinitum). For Alchian
and Demsetz, the firm therefore is an entity which brings together a team which is more productive working together than at arm’s
length through the market, because of informational problems associated with monitoring of effort. In effect, therefore, this is a
"principal-agent" theory, since it is asymmetric information within the firm which Alchian and Demsetz emphasise must be
overcome. In Barzel (1982)’s theory of the firm, drawing on Jensen and Meckling (1976), the firm emerges as a means of centralising
monitoring and thereby avoiding costly redundancy in that function (since in a firm the responsibility for monitoring can be
centralised in a way that it cannot if production is or
ganised as a group of workers each acting as a firm).

The weakness in Alchian and Demsetz’s argument, according to Williamson, is that their concept of team production has quite a
narrow range of application, as it assumes outputs cannot be related to individual inputs. In practice this may have limited
applicability (small work group activities, the largest perhaps a symphony orchestra), since most outputs within a firm (such as
manufacturing and secretarial work) are separable, so that individual inputs can be rewarded on the basis of outputs. Hence team
production cannot offer the explanation of why firms (in particular, large multi-plant and multi-product firms) exist, etc.

Asset specificity
For Oliver E. Williamson, the existence of firms derives from ‘asset specificity’ in production, where assets are specific to each other
such that their value is much less in a second-best use.[16] This causes problems if the assets are owned by different firms (such as
purchaser and supplier), because it will lead to protracted bargaining concerning the gains from trade, because both agents are likely
to become locked into a position where they are no longer competing with a (possibly large) number of agents in the entire market,
and the incentives are no longer there to represent their positions honestly: large-numbers bargaining is transformed into small-
number bargaining.
If the transaction is a recurring or lengthy one, re-negotiation may be necessary as a continual power struggle takes place concerning
the gains from trade, further increasing the transaction costs. Moreover, there are likely to be situations where a purchaser may
require a particular, firm-specific investment of a supplier which would be profitable for both; but after the investment has been made
it becomes a sunk cost and the purchaser can attempt to re-negotiate the contract such that the supplier may make a loss on the
investment (this is the hold-up problem, which occurs when either party asymmetrically incurs substantial costs or benefits before
being paid for or paying for them). In this kind of a situation, the most efficient way to overcome the continual conflict of interest
between the two agents (or coalitions of agents) may be the removal of one of them from the equation by takeover or merger. Asset
specificity can also apply to some extent to both physical and human capital, so that the hold-up problem can also occur with labour
(e.g. labour can threaten a strike, because of the lack of good alternativehuman capital; but equally the firm can threaten to fire).

Probably the best constraint on such opportunism is reputation (rather than the law, because of the difficulty of negotiating, writing
and enforcement of contracts). If a reputation for opportunism significantly damages an agent’s dealings in the future, this alters the
incentives to be opportunistic.[17]

Williamson sees the limit on the size of the firm as being given partly by costs of delegation (as a firm’s size increase its hierarchical
bureaucracy does too), and the large firm’s increasing inability to replicate the high-powered incentives of the residual income of an
owner-entrepreneur. This is partly because it is in the nature of a large firm that its existence is more secure and less dependent on the
actions of any one individual (increasing the incentives to shirk), and because intervention rights from the centre characteristic of a
firm tend to be accompanied by some form of income insurance to compensate for the lesser responsibility, thereby diluting
incentives. Milgrom and Roberts (1990) explain the increased cost of management as due to the incentives of employees to provide
false information beneficial to themselves, resulting in costs to managers of filtering information, and often the making of decisions
without full information. This grows worse with firm size and more layers in the hierarchy. Empirical analyses of transaction costs
have attempted to measure and operationalize transaction costs.[18][19] Research that attempts to measure transaction costs is the
most critical limit to efforts to potential falsification and validation of transaction cost economics.

Firm economies
The theory of the firm considers what bounds the size and output variety of firms. This includes how firms may be able to combine
labour and capital so as to lower the average cost of output, either from increasing, decreasing, or constant returns to scale for one
product line or from economies of scope for more than one product line.[8][20][21]

Other models
Efficiency wage models like that of Shapiro and Stiglitz (1984) suggest wage rents as an addition to monitoring, since this gives
employees an incentive not to shirk, given a certain probability of detection and the consequence of being fired. Williamson, Wachter
and Harris (1975) suggest promotion incentives within the firm as an alternative to morale-damaging monitoring, where promotion is
based on objectively measurable performance. (The difference between these two approaches may be that the former is applicable to
a blue-collar environment, the latter to a white-collar one). Leibenstein (1966) sees a firm’s norms or conventions, dependent on its
history of management initiatives, labour relations and other factors, as determining the firm’s "culture" of effort, thus affecting the
firm’s productivity and hence size.

George Akerlof (1982) develops a gift exchange model of reciprocity, in which employers offer wages unrelated to variations in
output and above the market level, and workers have developed a concern for each other’s welfare, such that all put in effort above
the minimum required, but the more able workers are not rewarded for their extra productivity; again, size here depends not on
rationality or efficiency but on social factors.[22] In sum, the limit to the firm’s size is given where costs rise to the point where the
market can undertake some transactions more efficiently than the firm.

Recently, Yochai Benkler further questioned the rigid distinction between firms and markets based on the increasing salience of
“commons-based peer production” systems such as open source software (e.g., Linux), Wikipedia, Creative Commons, etc. He put
forth this argument in The Wealth of Networks: How Social Production Transforms Markets and Freedom, which was released in
2006 under a Creative Commonsshare-alike license.[23]
Grossman-Hart-Moore theory
In modern contract theory, the “theory of the firm” is often identified with the “property rights approach” that was developed by
Sanford J. Grossman, Oliver D. Hart, and John H. Moore.[24][25] The property rights approach to the theory of the firm is also known
as the “Grossman-Hart-Moore theory”. In their seminal work, Grossman and Hart (1986), Hart and Moore (1990) and Hart (1995)
developed the incomplete contractingparadigm.[26][27][28] They argue that if contracts cannot specify what is to be done given every
possible contingency, then property rights (and hence firm boundaries) matter. Specifically, consider a seller of an intermediate good
and a buyer. Should the seller own the physical assets that are necessary to produce the good (non-integration) or should the buyer be
the owner (integration)? After relationship-specific investments have been made, the seller and the buyer bargain. When they are
symmetrically informed, they will always agree to collaborate. Yet, the division of the ex post surplus depends on the parties’
disagreement payoffs (the payoffs they would get if no ex post agreement were reached), which in turn depend on the ownership
structure. Thus, the ownership structure has an influence on the incentives to invest. A central insight of the theory is that the party
with the more important investment decision should be the owner. Another prominent conclusion is that joint asset ownership is
suboptimal if investments are in human capital.

The Grossman-Hart-Moore model has been successfully applied in many contexts, e.g. with regard to privatization.[29] Chiu (1998)
and DeMeza and Lockwood (1998) have extended the model by considering different bargaining games that the parties may play ex
post (which can explain ownership by the less important investor).[30][31] Oliver Williamson (2002) has criticized the Grossman-
Hart-Moore model because it is focused on ex ante investment incentives, while it neglects ex post inefficiencies.[32] Schmitz (2006)
has studied a variant of the Grossman-Hart-Moore model in which a party may have or acquire private information about its
disagreement payoff, which can explain ex post inefficiencies and ownership by the less important investor.[33] Several variants of
[34]
the Grossman-Hart-Moore model such as the one with private information can also explain joint ownership.

See also
Dynamic capabilities
Industrial organization
Knowledge-based theory of the firm
Organizational capital
Organizational effectiveness
Transaction cost
Williamson's model of managerial discretion

Notes
1. Kantarelis, Demetri (2007).Theories of the Firm. Geneve: Inderscience.ISBN 0-907776-34-5. Description (http://ww
w.inderscience.com/books/TOF_leaflet.pdf) & review. (http://www.inderscience.com/books/TOF_american_econ_revi
ew.pdf)
• Spulber, Daniel F. (2009). The Theory of the Firm, Cambridge. Description (http://www.cambridge.org/us/catalogu
e/catalogue.asp?isbn=9780521736602), front matter (http://assets.cambridge.org/97805217/36602/frontmatter/9780
521736602_frontmatter.pdf), and "Introduction" excerpt (http://assets.cambridge.org/97805217/36602/excerpt/97805
21736602_excerpt.pdf).
2. Thomas N. Hubbard (2008). "firm boundaries (empirical studies),"The New Palgrave Dictionary of Economics, 2nd
Edition. Abstract. (http://www.dictionaryofeconomics.com/article?id=pde2008_F000288)
• Barak D. Richman and Jeffrey Mache (2008). "Transaction Cost Economics: An Assessment of Empirical
Research in the Social Sciences,"Business and Politics, 10(1), pp. 1-63. Abstract. (http://www.degruyter.com/view/j/
bap.2008.10.1/bap.2008.10.1.1210/bap.2008.10.1.1210.xml)[ PDF. (http://scholarship.law.duke.edu/cgi/viewcontent.
cgi?article=2287&context=faculty_scholarship)
3. Coase, Ronald H. (1937). "The Nature of the Firm". Economica. 4 (16): 386–405 (http://www.sonoma.edu/users/e/eyl
er/426/coase1.pdf). doi:10.1111/j.1468-0335.1937.tb00002.x(https://doi.org/10.1111%2Fj.1468-0335.1937.tb00002.
x).
 4. Holmström, Bengt, and John Roberts (1998). "The Boundaries of the Firm Revisited,"Journal of Economic
Perspectives, 12(4), pp. 73–94 (http://pages.stern.nyu.edu/~wgreene/entertainmentandmedia/Holmstrom.pdf) (close
Pages tab).Jean Tirole (1988). The Theory of Industrial Organization. "The Theory of the Firm", pp.15–60. (https://b
ooks.google.com/books?id=HIjsF0XONF8C&pg=P A15) MIT Press.
• Luigi Zingales (2008). "corporate governance,"The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
(http://www.dictionaryofeconomics.com/article?id=pde2008_C000370&edition=current&q=governance%20&topicid=
&result_number=1)
• Oliver E. Williamson (2002). "The Theory of the Firm as Governance Structure: From Choice to Contract,"
Journal of Economic Perspectives, 16(3), pp. 171-195. (http://groups.haas.berkeley.edu/bpp/oew/FirmAsGovernance
Structure.pdf)
• _____ (2009). "Transaction Cost Economics: The Natural Progression,"[1] (http://nobelprize.org/nobel_prizes/eco
nomics/laureates/2009/williamson_lecture.pdf)Nobel lecture. Reprinted in (2010)American Economic Review,
100(3), pp. 673–90.
5. Hart, Oliver and John Moore (1990). "Property Rights and the Nature of the Firm,"Journal of Political Economy,
98(6), pp. 1119-1158. (http://columbiauniversity.us/itc/sipa/u8213-03/packet/hart-600.pdf)
6. Berle, Adolph A.; Gardiner C. Means (1933).The Modern Corporation and Private Property(https://books.google.co
m/?id=KbxhFrNr4IAC). New York: Macmillan. ISBN 978-0-88738-887-3.
7. Hall, R.; Charles J. Hitch (1939). "Price Theory and Business Behaviour".
Oxford Economic Papers. Oxford
University Press. 2 (1): 12–45. JSTOR 2663449 (https://www.jstor.org/stable/2663449).
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, v. 2, p. 357.
9. Ronald H. Coase (1988). "The Nature of the Firm: Influence",Journal of Law, Economics, & Organization, 4(1), p p.
33 (https://www.jstor.org/pss/765013)-47. Reprinted in The Nature of the Firm: Origins, Evolution, and Development
(1993), Oliver E. Williamson and S, G. Winter
, ed., pp. 61–74 (https://books.google.com/books?id=VXIDgGjLHVgC&
pg=PA61).
10. Putterman, Louis (1996).The Economic Nature of the Firm. Cambridge: Cambridge University Press.ISBN 0-521-
47092-7.
11. Richardson, George Barclay(1972). "The Organisation of Industry".The Economic Journal. Blackwell Publishing.82
(327): 883. doi:10.2307/2230256 (https://doi.org/10.2307%2F2230256). JSTOR 2230256 (https://www.jstor.org/stabl
e/2230256).
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Ownership Structure".Journal of Financial Economics. 3 (4): 305–360 (http://business.illinois.edu/josephm/BA549_F
all%202012/Session%205/5_Jensen_Meckling%20(1976).pdf) . doi:10.1016/0304-405x(76)90026-x(https://doi.org/1
0.1016%2F0304-405x%2876%2990026-x). SSRN 94043 (https://ssrn.com/abstract=94043) .
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Economic Review. 61 (2): 380–387.
14. Cyert, Richard; March, James (1963). Behavioral Theory of the Firm(https://books.google.com/?id=W_K9JJ7xdiIC)
.
Oxford: Blackwell. ISBN 978-0-631-17451-6.
15. Alchian, Armen A.; Demsetz, Harold (1972). "Production, Information Costs, and Economic Organization".The
American Economic Review. American Economic Association.62 (5): 777–795. JSTOR 1815199 (https://www.jstor.o
rg/stable/1815199).
16. Williamson, Oliver E. (1975). Markets and Hierarchies: Analysis and Antitrust Implications
. New York: The Free
Press.
17. Oliar, Dotan; Sprigman, Christopher Jon (2008). "There's No Free Laugh (Anymore): The Emergence of Intellectual
Property Norms and the Transformation of Stand-Up Comedy" (http://www.virginialawreview.org/content/pdfs/94/178
7.pdf) (PDF). Virginal Law Review. 94 (8): 1787–1867.
18. Barak D. Richman and Jeffrey Mache (2008). "Transaction Cost Economics: An Assessment of Empirical Research
in the Social Sciences,"Business and Politics, 10(1), pp. 1-63. Abstract. (http://www.degruyter.com/view/j/bap.2008.
10.1/bap.2008.10.1.1210/bap.2008.10.1.1210.xml)PDF. (http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article
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19. Special Issue of Journal of Retailing in Honor of The Sveriges Riksbank Prize in Economic Sciences in Memory of
Alfred Nobel 2009 to Oliver E. Williamson, 86(3), pp. 209-290, article-preview
links (http://www.sciencedirect.com/sci
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ps://www.jstor.org/pss/1815729)–272.
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e.com/books?id=HIjsF0XONF8C&pg=P A18) MIT Press.
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through Methodology and Strategy".10. 2: 34.
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g/wealth_of_networks/index.php/Main_Page). New Haven: Yale University Press.
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. The Quarterly Journal of Economics. 112
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References
Crew, Michael A. (1975). Theory of the Firm. New York: Longman. p. 182.ISBN 0-582-44042-4.
Clarke, Roger; McGuinness, Tony (1987). The Economics of the Firm. Cambridge: Blackwell.ISBN 0-631-14075-1.
Foss, Nicolai J., ed. (2000).The Theory of the Firm: Critical Perspectives on Business and Management . Taylor and
Francis. v. I–IV. Chapter preview links, including Bengt Holmström and Jean Tirole, "The Theory of the Firm," v. I, pp.
148–222 from Handbook of Industrial Organization(1989), R. Schmalensee and R. W. Willig, ed., v. 1, ch. 2, p p.
61–133.
Hart, Oliver. Firms, Contracts, and Financial Structure. New York: Oxford University Press.
Robé, Jean-Philippe, "The Legal Structure of the Firm", Accounting, Economics, and Law, Vol. 1, Iss. 1, Article 5,
2011.
Further reading
Kroszner, Randall S.; Putterman, Louis, eds.(2009). The Economic Nature of the Firm: A Reader(3rd ed.)
Cambridge University Press.

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