The Nature of the Firm

Neil M. Kay

Chapter 3 in The Evolving Firm, 1982, pp 30-56 from Palgrave Macmillan

Abstract: Abstract In this chapter we shall be concerned with the central problem of the theory of the firm; namely that it does not work. This problem appears less one of poor maintenance or temporary breakdown, more one of fundamentally faulty design. The general malfunctioning of this theory when faced with empirical questions is clearly evident in industrial organisation, the applied field which the theory of the firm should naturally serve. Scherer (1970, p.3) points out that for industrial organisation problems, ‘the pure theories of firm and market behaviour have been bogged down on a broad front’. Nelson (1976, p.732) echoes Scherer and points the finger: ‘Industrial organisation is in deep intellectual trouble. The source of that trouble is that old textbook theory that we all know so well’, while Reekie (1979, p.1) endorses Nelson and complains glumly, ‘industrial organisation is a field of intellectual muddle’.

Keywords: Transaction Cost; Cost Curve; Bounded Rationality; Synergy Effect; Neoclassical Theory (search for similar items in EconPapers)
Date: 1982
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-06112-9_3

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DOI: 10.1007/978-1-349-06112-9_3

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