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From fictions and aggregates to real entities in the theory of the firm

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  • GINDIS, DAVID

Abstract

According to the dominant ‘nexus of contracts’ and ‘collection of assets’ views of the firm, the firm is a either a fiction or an aggregate. Although legal personality is important in both accounts, everything is said to be achieved by private contract alone and the law's role in creating legal entity status is dismissed. The paper challenges both these aspects by reconsidering an alternative ‘real entity theory’ that dominated debates at the turn of the twentieth century. This forgotten view holds that the firm is neither a fiction nor an aggregate but a real entity, and underlines the creation of legal entity status as a fundamental role of the law. The paper discusses this view's ontological and legal insights, clarifies the proposition that the firm is a real entity, and proposes it as a starting point for a theory of the firm.

Suggested Citation

  • Gindis, David, 2009. "From fictions and aggregates to real entities in the theory of the firm," Journal of Institutional Economics, Cambridge University Press, vol. 5(1), pages 25-46, April.
  • Handle: RePEc:cup:jinsec:v:5:y:2009:i:01:p:25-46_00
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    Cited by:

    1. Inga Hardeck & J. William Harden & David R. Upton, 2021. "Consumer Reactions to Tax Avoidance: Evidence from the United States and Germany," Journal of Business Ethics, Springer, vol. 170(1), pages 75-96, April.
    2. Richard Adelstein, 2013. "Firms as Persons," Wesleyan Economics Working Papers 2013-003, Wesleyan University, Department of Economics.
    3. Richard Adelstein, 2010. "Firms as Social Actors," Wesleyan Economics Working Papers 2013-003, Wesleyan University, Department of Economics.
    4. Simon Deakin, 2017. "Tony Lawson's Theory of the Corporation: Towards a Social Ontology of Law," Working Papers wp491, Centre for Business Research, University of Cambridge.
    5. Simon Deakin, 2017. "Tony Lawson’s Theory of the Corporation: Towards a Social Ontology of Law," Cambridge Journal of Economics, Oxford University Press, vol. 41(5), pages 1505-1523.
    6. Chassagnon, Virgile, 2012. "Une analyse historique de la nature juridique de la firme," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 12.
    7. Stephanie Blankenburg, 2012. "Limited liability," Chapters, in: Jan Toporowski & Jo Michell (ed.), Handbook of Critical Issues in Finance, chapter 27, pages i-ii, Edward Elgar Publishing.
    8. 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.
    9. Geoffrey M. Hodgson, 2012. "Veblen, Commons and the Theory of the Firm," Chapters, in: Michael Dietrich & Jackie Krafft (ed.), Handbook on the Economics and Theory of the Firm, chapter 5, Edward Elgar Publishing.
    10. John Buchanan & Dominic Heesang Chai & Simon Deakin, 2013. "Empirical Analysis of Legal Institutions and Institutional Change: Multiple-Methods Approaches and their Application to Corporate Governance Research," Working Papers wp445, Centre for Business Research, University of Cambridge.
    11. Fabian Grabicki & Jens Weghake, 2016. "Why the QWERTY phenomenon is not just in the theorists’ minds yet not pose a problem in reality," TUC Working Papers in Economics 0016, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
    12. 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.
    13. Hodgson, Geoffrey M., 2013. "Observations on the legal theory of finance," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 331-337.

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