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The “Alternative” Theories of Knight and Coase, and the Modern Theory of the Firm

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  • Foss, Nicolai J.

Abstract

In his contribution to the 1987 conference that celebrated the fiftieth anniversary of Ronald Coase's “The Nature of the Firm” (1937), Harold Demsetz noted that from the birth of modern economics to 1970, “only two works seem to have been written about the theory of the firm that have altered the perspectives of the profession: Knight's Risk, Uncertainty, and Profit (1921) and Coase's ‘The Nature of the Firm’” (Demsetz 1993, in Williamson and Winter 1993, p. 159). It is easy to feel uncomfortable with this observation. First, Coase's article was ignored for decades. Second, Knight's book did not receive much attention because of its theory of economic organization, but because of its statement of the theory of perfect competition (Stigler 1957; Machovec 1995), its distinction between risk and uncertainty, and its theory of profits (see, e.g., Boulding 1942 and Papandreou 1952).'

Suggested Citation

  • Foss, Nicolai J., 1996. "The “Alternative” Theories of Knight and Coase, and the Modern Theory of the Firm," Journal of the History of Economic Thought, Cambridge University Press, vol. 18(1), pages 76-95, April.
    • Handle: RePEc:cup:jhisec:v:18:y:1996:i:01:p:76-95_00
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    Cited by:

    1. Yu Tony Fu-Lai, 2002. "The Knightian Firm: Uncertainty, Entrepreneurial Judgement and Coordination," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 12(4), pages 1-17, December.
    2. Richard N. Langlois & Nicolai J. Foss, 1999. "Capabilities and Governance: The Rebirth of Production in the Theory of Economic Organization," Kyklos, Wiley Blackwell, vol. 52(2), pages 201-218, May.
    3. Nicolai J. Foss & Peter G. Klein, 2004. "Entrepreneurshoip and the Economic Theory of the Firm Any Gains from Trade?," DRUID Working Papers 04-12, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    4. Nicolai J. Foss & Peter G. Klein, 2013. "Entrepreneurship, entrepreneurial governance and economic organization," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 22, Edward Elgar Publishing.
    5. Jonathan Marks & Samuel Dawa & Shungu Kanyemba, 2020. "Transnational Entrepreneurship in Sub-Saharan Africa: An Absorptive Capacity Theory of Knowledge Spillover Entrepreneurship Perspective," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 6(1), pages 114-139, January.

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