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Topic: Theory of the firm

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	SSRN-Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure by Michael Jensen, William Meckling
		This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm.
		We define the concept of agency costs, show its relationship to the 'separation and control' issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears the costs and why, and investigate the Pareto optimality of their existence.
		We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem.
	papers.ssrn.com /sol3/papers.cfm?abstract_id=94043 (427 words)

	EXAMINING THE THEORY OF THE FIRM IN IPE AND IE (Site not responding. Last check: 2007-11-06)
		Even when a firm is taken up as a cooperating agent within capitalist framework, as in the case of the study of share economy by Weitzman, the neoclassical marginalist assumptions are used to explain the resource allocation between a wage-paying firm and a worker managed firm.
		The conclusion gained from Islamic economic treatment of the theory of the firm, is that all such approaches have remained neoclassical in essence, and nothing Islamic has been gained either in terms of analytics (models) or methodology (epistemological).
		The firm is therefore formed as a social contract in which private ownership is upheld by the limits of conscious social behaviour as presented by the Shari'ah.
	islamic-finance.net /islamic-economy/chap17/chap17index.html (3687 words)

	Maximization Debates
		The new theories of the firm attempted to prove a variant of Friedman's (1953) conjecture that firms which had profit-maximizing behavior would be selected for.
		Alchian and Demsetz's idea that the behavior of the firm is in fact not too different from the behavior of the market was also famously proposed by Jensen and Meckling (1976) who purse the idea of "agency costs" as the source of firm structure.
		The old marginalist debate re-emerged in the 1980s with the evolutionary theory of Richard Nelson and Sidney Winter (1982) which combined the earlier Alchian-Becker arguments with the theories of the firm of the New Institionalists.
	cepa.newschool.edu /het/essays/product/Maxim.htm (1932 words)

	Post-structuralist Firm
		Firms are both living environments for human beings and shapers of the living environment called the society or social formation.
		The ability of the firm to continue as a living organism requires that a wide range of relationships be reproduced by determinate social processes (economic, political, and cultural).
		The directors are responsible for hiring top-level managers who are motivated to meet these conditions for the firms' continued existence and for distributing portions of the cash flow to certain of these stakeholders to secure their continued cooperation in the life of the firm.
	www.mtholyoke.edu /courses/sgabriel/post_structuralist_firm.htm (2965 words)

	Theories of the Firm and Their Application in Business Administration (Site not responding. Last check: 2007-11-06)
		During the last two decades, economic theories of the firm have become increasingly influential in a number of disciplines in business administration, notably in strategic management, organization theory, corporate governance, and marketing.
		The aim of this course is to provide a structured introduction to the main theories of economic organization, such as agency theory, property rights theory, and transaction cost theory, emphasizing the application of these theories to particularly strategic management, organization theory, and empirical work.
		This lecture shows how the emergence of the economic theory of the firm reflects a general change in economics towards more realistic assumptions, a greater concern with small numbers interaction, and an expansion of the set of phenomena that economists think they can legitimately deal with it (Kreps).
	www.nicolaifoss.com /teaching/PhD_course.htm (609 words)

	A Theory of the Firm: Governance, Residual Claims, and Organizational Forms - Book Review Administrative Science ...
		In classical theories of the firm, owners are merely suppliers of capital, homogenously risk averse and value maximizing.
		Instead, it reconstructs a theory of the firm on a positive agency theory foundation, arguing that it is the contractual relationship between the suppliers and users of capital and talent that determine what, how, and when production occurs.
		The theory's conclusion that such systems are doomed to failure presages the collapse of the Soviet state and the ensuing adjustments toward free-market systems around the world.
	findarticles.com /p/articles/mi_m4035/is_2_47/ai_93463223 (784 words)

	The Theory of the Firm, Managerial Responsibility, and Catholic Social Teaching (Site not responding. Last check: 2007-11-06)
		The “theory of the firm” is a relatively modern economic construct and one with several variants.
		The value of firms to society, for better or for worse, must be measured by how well management performs its responsibilities, and that must be determined by the nature of those responsibilities.
		A Catholic “theory of the firm,” while not rejecting efficiency and profitability, calls all within the enterprise to be committed to the common good and to recognize the dignity of every human person who is affected by the firm.
	www.acton.org /publicat/m_and_m/2003_fall/garvey.html (5946 words)

	Theory of the firm 14
		So that means that the firms can now sell more with higher price, so it is very profitable for them when some of the conditions of demand moves in favor.
		All the firms try to develop the loyalty to their brand, the easiest and most used way of doing this is by advertisements, so one more reason why firms advertise is to develop the brand loyalty.
		Both firm and consumers benefit from that: firm by increasing its sales (and if the advertising was not enormously expensive also its profits), consumers benefit by having the better product, which e.g.
	www.ieg.ee /keith/docs/keskkoolECON/E13PERF.htm (1015 words)

	[No title]
		We conclude by arguing for the need to create a "managerial theory of the firm" that would be more attuned to the premises of the key actors within the firm so as to be able to illuminate the corporate world as seen by managers and encompass the issues that they perceive to be important.
		The behavioral theory of the firm is, in essence, premised on the absence of leadership, while ABB's renewal process is clearly driven by highly effective leaders at the company's top level.
		The remoteness is manifest in theories such as population ecology and transaction cost analysis in which the focal level of analysis either lies in gross aggregations such as organizational populations or in the micro-level detail of specific transactions.
	www.gsia.cmu.edu /bosch/bart.html (12936 words)

	Amazon.com: A Theory of the Firm: Governance, Residual Claims, and Organizational Forms: Books: Michael C. Jensen (Site not responding. Last check: 2007-11-06)
		This theory offers no account of how conflicts between different stakeholders are to be resolved, and gives managers no principle on which to base decisions, except to follow their own preferences.
		Instead, it reconstructs a theory of the firm on a positive agency theory foundation, arguing that it is the contractual relationship between the suppliers and users of capital and talent that determine what, how and when production occurs.
		A complete theory of the firm thus requires one to balance the virtues of discretion against the need to require that discretion be used responsibly.
	www.amazon.com /Theory-Firm-Governance-Residual-Organizational/dp/0674002954 (2441 words)

	Business ethics and the theory of the firm. \| Legal from AllBusiness.com (Site not responding. Last check: 2007-11-06)
		The modern theory of the firm, which is central to finance and corporate law, views the corporation as a nexus of contracts among the various corporate constituencies.(1) Upon this foundation, finance theory and corporate law postulate shareholder wealth as the objective of the firm.
		As a normative theory of the firm, the nexus of contracts view does not disregard nonshareholder constituencies but provides, in fact, a framework for understanding and addressing their distinctive problems.
		Because the contractual theory is concerned mainly with the nature of the firm itself and with the groups that comprise it, many business ethics problems that arise from more general economic forces fall outside the scope of the theory and cannot be addressed by the theory's framework.
	www.allbusiness.com /legal/596834-1.html (854 words)

	SEO Theory - SEO Theory and Analysis Blog
		SEO Theory is an embryonic science, only a few years old and lacking the formal discipline of a true science.
		SEO Theory studies the behaviors of systems of Web pages and search engine systems, as well as their interactions.
		Non-technical interest in SEO Theory may be driven by no more than simple curiosity, but as the business and organizational comunities increase their dependence upon search engine optimization, decision-makers need to understand the risks, values, and returns offered by search engine optimization.
	www.seo-theory.com (357 words)

	Neoclassical theory of the firm
		The neoclassical theory of the firm portrays the marginal cost curve and the average cost curve as distinctly U-shaped.
		The neoclassical theory of the firm divides production time periods into 3 classes: the market period, when output cannot be altered; the short run, when all but one factor of production can be altered; and the long run, when all factors can be altered.
		The usual example given of a perfectly competitive firm is a wheat farm.
	www.debunking-economics.com /Maths/margcost_avcost.htm (1468 words)

	RAND \| Papers \| Toward a Neo-Schumpeterian Theory of the Firm.
		Contrary to the conventional theory, no sharp distinction can be made between old and new techniques; there is a continuous gradation from highly routine to highly innovative behavior.
		The attributes that make the firm a significant entity are its existing patterns of routine activity, its tangible and intangible assets, its recent history, the repertoires of actions available to the individuals involved, and the terms in which they conceptualize the firm and their participation in it.
		A neo-Schumpeterian theory of the firm must be historical, dynamic, and, ideally, probabilistic, recognizing that the firm's behavior is shaped by many unobservable factors.
	www.rand.org /pubs/papers/P3802 (343 words)

	Theory of the Firm
		Theory of the firm is an analysis of the behavior of companies that examine inputs, production methods, output and prices.
		The traditional theory assumes that profit maximization is the goal of the firm.
		O E Williamson, The Economics of Discretionary Behaviour: Managerial Objectives in a Theory of the Firm (Englewood Cliffs, N.J., 1964)
	www.economyprofessor.com /economictheories/theory-of-the-firm.php (152 words)

	Back to the Drawing Board: Is the Traditional Theory of the Firm Obsolete? - Knowledge@Wharton
		In economics, finance, marketing, operations, and accounting, the theory of the firm plays a central role, and Wharton faculty members are now questioning whether an idea of the firm that traces its lineage all the way back to Adam Smith is still a relevant model today.
		"The traditional theory of the firm is about the unitary, rational actor that more or less controls all the pieces of the puzzle that it needs in order to produce its outputs," says Kleindorfer.
		In accounting, for instance, a better theory of the firm might help lead to better ways to measure value.
	knowledge.wharton.upenn.edu /article/1047.cfm (1119 words)

	The Transaction Cost Approach to the Theory of the Firm
		Repair services in some firms may be supplied by an internal organization; in others it is provided by specialized firms from outside.
		This leads to long term contracts in which the remuneration is specified for the contractee in return for obeying, within limits, the direction of the entrepreneur.
		Coase notes that the economic theory of the production level of a plant in the short run and long run are well worked out, but the theory of the size of the firm is not well developed.
	www2.sjsu.edu /faculty/watkins/coase.htm (952 words)

	Web Design - New York, NY - NYC Website Designers - Net Theory - Internet Development, Programming in Manhattan
		Net Theory is a New York based web design and development company, specializing in custom solutions for e-commerce and data-driven websites.
		Smithsonian.com and GiftGirl, both designed and coded by Net Theory, are launched.
		Designed and programmed by Net Theory, ADOC Systems, built on the Ruby on Rails platform, is launched.
	www.nettheory.com (381 words)

	The Transaction Cost Approach to the Theory of the Firm
		Repair services in some firms may be supplied by an internal organization; in others it is provided by specialized firms from outside.
		A firm is a system of long-term contracts that emerge when short-term contracts are unsatisfactory.
		Coase notes that the economic theory of the production level of a plant in the short run and long run are well worked out, but the theory of the size of the firm is not well developed.
	www.sjsu.edu /faculty/watkins/coase.htm (952 words)

	Toward a Knowledge-Based Theory of the Firm
		Firms exist because markets are incapable of coordinating the knowledge of individual specialists.
		While organizational theory has spent much time focused on the difficulties of achieving cooperation due to the differing goals of organizational members or the divergence of employee and owner goals, Grant proposes that even with cooperation, coordination of specialized knowledge is quite difficult.
		The ability of a firm to integrate knowledge held by individuals within the organization creates its competitive advantage.
	www.iir.berkeley.edu /cohre/grant.html (553 words)

	An Entrepreneurial Theory of the Firm - Microsoft Reader Catalog of eBooks
		Traditional theories of the firm have concentrated on such topics as technology, evolution and transaction costs whilst failing to account for one of the most fundamental aspects of the market process: entrepreneurial activity.
		An Entrepreneurial Theory of the Firm makes a thorough and comprehensive enquiry into the nature of the relationship that exists between firms and markets, with separate, in-depth explorations of the issues of both the existence and inner organisation of the firm.
		Sautet develops a model that explains the emergence of the firm in the market process as the result of entrepreneurial activity in the context of genuine uncertainty.
	www.mslit.com /details.asp?bookid=0203569393 (197 words)

	A Behavioral Theory of the Firm - Book Information
		has become a classic work in organizational theory, and is one of the most significant contributions to improving the theory of the firm.
		Antecedents of the Behavioral Theory of the Firm.
		A Summary of Basic Concepts in the Behavioral Theory of the Firm.
	www.blackwellpublishing.com /book.asp?ref=0631174516 (161 words)

	Mises Economics Blog: The Theory of the Firm (lecture 13 of 32)
		The Theory of the Firm (lecture 13 of 32)
		These notes are from the lecture The Theory of the Firm, given at the Mises University.
		The theory of the firm seems to be similar, even identical, to panarchist theory.
	blog.mises.org /archives/002134.asp (700 words)

	Definition of Theory of the Firm
		Microeconomics is traditionally constructed from two branches, the theory of the firm and the theory of the consumer.
		The counterpart to the supply and demand for goods is the supply and demand for labor by consumers and firms.
		The EconModel applications that feature the Theory of the Firm include Perfect Competition, Monopoly / Monopolistic Competition, Price Discrimination, and The Demand for Labor.
	www.econmodel.com /classic/terms/theory_firm.htm (80 words)

	Amazon.com: Behavioral Theory of the Firm: Books: Richard M. Cyert,James G. March (Site not responding. Last check: 2007-11-06)
		Behavioral Theory of the Firm has become a classic work in organizational theory, and is one of the most significant contributions to improving the theory of the firm.
		Major subtheories for a behavioral theory of the firm: theories of organizational goals, org expectations, org choice and org.
		Goals arise in such a form because the firm is, in fact, a coalition of participants with disparate demands, changing foci of attention, and limited ability to attend to all organization problems simultaneously" (pg 43)
	www.amazon.com /Behavioral-Theory-Firm-Richard-Cyert/dp/0631174516 (1094 words)

	CHAPTER D6. CHALLENGES TO THE THEORY OF THE FIRM
		It is likely to be in the neighborhood of a conventional mark-up level used throughout the industry, but small differences may persist among competing firms.
		This is no problem in the single-product firm: all overhead (i.e., fixed) costs go to the single product, and are then "spread" across all of the units produced.
		Explain why marginal decision criteria may not be useable when the objective of the firm is to pursue some goal other than profit maximization.
	facweb.furman.edu /~dstanford/mecon/d6.htm (2343 words)

	Harvard University Press: A Theory of the Firm : Governance, Residual Claims, and Organizational Forms by Michael C. ...
		The implicit denial of this proposition is the fallacy of the so-called stakeholder theory of the corporation, which argues that corporations should be run in the interests of all stakeholders.
		This theory offers no account of how conflicts between different stakeholders are to be resolved, and gives managers no principle on which to base decisions, except to follow their own preferences.
		In practice, shareholders delegate their control rights to a board of directors, who hire, fire, and set the compensation of the chief officers of the firm.
	www.hup.harvard.edu /catalog/JENTHF.html (279 words)

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