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The Legal Nature of the Firm and the Myth of the Firm-Market Hybrid

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  • Geoffrey Hodgson

Abstract

A sharp conceptual distinction used to be drawn between the firm and the market. However, since the 1970s, many economists and sociologists have argued that the boundaries of the firm are indistinct. Ideas emerged of 'internal markets' within firms, of the 'quasifirm', of 'hybrid firms' and of firms as 'quasi-markets'. This article re-examines the formal, legal conception of the firm. It is argued that there is no good reason to abandon this conception, even in the light of relational contracting, networking, subcontracting and other developments. To avoid confusion, additional terms such as 'supplier network' or 'conglomerate' should be used to describe these phenomena, rather than abandoning a legally-based definition of the firm. With this clarified definition, 'internal markets' and 'hybrid firms' disappear from view.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 9 (2002)
Issue (Month): 1 ()
Pages: 37-60

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Handle: RePEc:taf:ijecbs:v:9:y:2002:i:1:p:37-60

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Related research

Keywords: Firm; Market; Relational Exchange; Internal Markets; Hybrids;

References

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Citations

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Cited by:
  1. Hodgson, Geoffrey M., 2013. "Observations on the legal theory of finance," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 331-337.
  2. Kalle Pajunen, 2010. "A “Black Box” of Stakeholder Thinking," Journal of Business Ethics, Springer, vol. 96(1), pages 27-32, August.
  3. Virgile Chassagnon, 2008. "The Network-Firm as a Single Real Entity: Beyond the Aggregate of Distinct Legal Entities," Post-Print halshs-00374978, HAL.
  4. Bart Nooteboom, 2007. "Organization, Evolution, Cognition and Dynamic Capabilities," The IUP Journal of Managerial Economics, IUP Publications, vol. 0(4), pages 31-55, November.
  5. Nicolai J. Foss, . ""Coase vs Hayek": Economic Organization in the Knowledge Economy," IVS/CBS Working Papers 2001-6, Department of Industrial Economics and Strategy, Copenhagen Business School.
  6. Kapás, Judit, 2003. "A piac mint intézmény - szélesebb perspektívában
    [The market as an institution - in a broader perspective]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1076-1094.
  7. Bart Nooteboom, 2014. "In What Sense do Firms Evolve?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 234(2-3), pages 185-209, April.
  8. Virgile Chassagnon, 2008. "Qu'est-ce qu'une firme (-réseau) ?," Post-Print halshs-00374758, HAL.
  9. Michael Dietrich & Jackie Krafft, 2011. "Firm development as an integrated process: with evidence from the General Motors–Fisher Body case," Journal of Evolutionary Economics, Springer, vol. 21(4), pages 665-686, October.
  10. Dick Ruiter, 2005. "Is Transaction Cost Economics Applicable to Public Governance?," European Journal of Law and Economics, Springer, vol. 20(3), pages 287-303, November.
  11. Cerrato, Daniele, 2006. "The multinational enterprise as an internal market system," International Business Review, Elsevier, vol. 15(3), pages 253-277, June.
  12. Kapás, Judit, 2003. "Mutáns vállalatok? A belső hibridekről
    [Mutant firms? On internal hybrids]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 335-349.
  13. Bernard Baudry & Virgile Chassagnon, 2012. "The vertical network organization as a specific governance structure: what are the challenges for incomplete contracts theories and what are the theoretical implications for the boundaries of the (hub," Journal of Management and Governance, Springer, vol. 16(2), pages 285-303, May.
  14. Bart Nooteboom, 2008. "In what sense do firms evolve?," Papers on Economics and Evolution 2008-12, Philipps University Marburg, Department of Geography.

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