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Thinking about the Firm: A Review of Daniel Spulber's The Theory of the Firm

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  • Oliver Hart

Abstract

In this review, I describe how economists have moved beyond the firm as a black box to incorporate incentives, internal organization, and firm boundaries. I then turn to the way that the theory of the firm is treated in Daniel Spulber's book The Theory of the Firm: Microeconomics with Endogenous Entrepreneurs, Firms, Markets, and Organizations . Spulber's goal is to explain why firms exist, how they are established, and what they contribute to the economy. To accomplish this, Spulber defines a firm to be a transaction institution whose objectives differ from those of its owners. For Spulber, this separation is the key difference between the firm and direct exchange between consumers. I raise questions about whether this is a useful basis for a theory of the firm. (JEL D21)

Suggested Citation

  • Oliver Hart, 2011. "Thinking about the Firm: A Review of Daniel Spulber's The Theory of the Firm," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 101-113, March.
  • Handle: RePEc:aea:jeclit:v:49:y:2011:i:1:p:101-13
    Note: DOI: 10.1257/jel.49.1.101
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    2. Oliver Hart & John Moore, 2008. "Contracts as Reference Points," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 1-48.
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    Cited by:

    1. Buehler, Stefan & Burghardt, Dirk, 2013. "Globalization and Vertical Structure: An Empirical Investigation," Economics Working Paper Series 1310, University of St. Gallen, School of Economics and Political Science.
    2. Schmitz, Patrick W., 2014. "Optimal ownership of public goods reconsidered," Economics Letters, Elsevier, vol. 125(1), pages 21-24.
    3. Schmitz, Patrick W., 2013. "Investments in physical capital, relationship-specificity, and the property rights approach," Economics Letters, Elsevier, vol. 119(3), pages 336-339.
    4. Liesbeth Dries & Domenico Dentoni, 2015. "Private sector investments to create market-supporting institutions: The case of Malawian Agricultural Commodity Exchange," Working Papers 2015/08, Maastricht School of Management.
    5. Daniel Lechmann & Claus Schnabel, 2014. "Are the self-employed really jacks-of-all-trades? Testing the assumptions and implications of Lazear’s theory of entrepreneurship with German data," Small Business Economics, Springer, vol. 42(1), pages 59-76, January.
    6. Özgür Kıbrıs & Arzu Kıbrıs, 2016. "On surplus-sharing in partnerships," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(1), pages 89-111, June.
    7. Gindis, David & Hodgson, Geoffrey M. & Huang, Kainan & Pistor, Katharina, 2017. "Legal institutionalism: Capitalism and the constitutive role of lawAuthor-Name: Deakin, Simon," Journal of Comparative Economics, Elsevier, vol. 45(1), pages 188-200.
    8. Simon Deakin & David Gindis & Geoffrey M. Hodgson & Kainan Huang & Katharina Pistor, 2015. "Legal Institutionalism: Capitalism & the Constitutive Role of Law," Working Papers wp468, Centre for Business Research, University of Cambridge.
    9. Dimitri O. Ledenyov & Viktor O. Ledenyov, 2013. "On the theory of firm in nonlinear dynamic financial and economic systems," Papers 1302.6721, arXiv.org, revised Mar 2013.
    10. Müller, Daniel & Schmitz, Patrick W., 2016. "Transaction costs and the property rights approach to the theory of the firm," European Economic Review, Elsevier, vol. 87(C), pages 92-107.
    11. Harold Paredes-Frigolett & Pablo Nachar-Calderón & Carmen Marcuello, 2017. "Modeling the governance of cooperative firms," Computational and Mathematical Organization Theory, Springer, vol. 23(1), pages 122-166, March.
    12. Thomas J. Miceli, 2014. "Transaction-Specific Investments and Organizational Choice: A Coase-to-Coase Theory," Working papers 2014-06, University of Connecticut, Department of Economics.
    13. Carmen Marcuello & Pablo Nachar-Calderón, 2012. "Sociedad cooperativa y socio cooperativo: propuesta de sus funciones objetivo," Documentos de Trabajo dt2012-02, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    14. Paul Walker, 2015. "Contracts, Entrepreneurs, Market Creation And Judgement: The Contemporary Mainstream Theory Of The Firm In Perspective," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 317-338, April.
    15. Paul Walker, 2013. "The ‘Reference Point’ Approach To The Theory Of The Firm: An Introduction," Journal of Economic Surveys, Wiley Blackwell, vol. 27(4), pages 670-695, September.

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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