The Scope of the Corporation

Format:Print
| Language:English
| Pages:14

Abstract

Every company, regardless of size or configuration, has to make decisions about the appropriate scope of its operations. In fact, the issue is so fundamental that Ronald Coase won the Nobel Prize in Economics for merely asking the question, “what determines the scope of the firm?” Why, after all, should firms exist rather than having the economy consist of a collection of individual and independent agents seamlessly transacting with each other in a continually rearranging kaleidoscope of activities? Why do firms exist, and what determines the boundaries to the entity we identify as “a firm”? Coase’s seminal question gave rise to research into what became called “The Theory of the Firm”.