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The (new) nature and essence of the firm

Author

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  • Pitelis, Christos
  • Teece, David

Abstract

Extant explanations of the nature and scope of firms, such as transaction costs, property rights, metering and “resources” can be integrated into a more general (capability based) theory of the nature and essence of the firm that recognizes the importance to the firm of creating (and capturing) value from innovation. We note that the appropriability of returns from creative and innovative activity often requires the entrepreneurial creation and co-creation of markets. Accordingly, market failure and transaction costs approaches need to be revamped to capture the essence of entrepreneurial and managerial activity that extends beyond the mere exercise of authority. We suggest that the nature and objective of the firm in an economy with innovation and incomplete markets is to capture value (profit) from its advantages and actions; and that the way in which the firm tries to achieve this (by establishing quasisustainable competitive advantage) is its essence. This is non-separable from its nature and objectives.

Suggested Citation

  • Pitelis, Christos & Teece, David, 2009. "The (new) nature and essence of the firm," MPRA Paper 24317, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24317
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    References listed on IDEAS

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    Cited by:

    1. Blanche Segrestin & Kevin Levillain & Armand Hatchuel, 2016. "Purpose-driven corporations: how corporate law reorders the field of corporate governance," Post-Print hal-01323118, HAL.
    2. Andreoni, Antonio, 2014. "Structural learning: Embedding discoveries and the dynamics of production," Structural Change and Economic Dynamics, Elsevier, vol. 29(C), pages 58-74.
    3. Werner Hölzl, 2011. "Persistence, Survival and Growth: A Closer Look at 20 Years of High-Growth Firms in Austria," WIFO Working Papers 403, WIFO.
    4. Blanche Segrestin & Armand Hatchuel, 2011. "Autorité de gestion et avaries communes-pour un complément du droit de l’entreprise?," Revue Finance Contrôle Stratégie, revues.org, vol. 14(2), pages 9-36., June.
    5. Andreas Panagopoulos & Christos N. Pitelis, 2010. "Open innovation and the management of intra-firm conflict," International Journal of Learning and Intellectual Capital, Inderscience Enterprises Ltd, vol. 7(3/4), pages 295-307.
    6. repec:jes:wpaper:y:2013:v:5:p:378-387 is not listed on IDEAS
    7. Christos N. Pitelis & David J. Teece, 2010. "Cross-border market co-creation, dynamic capabilities and the entrepreneurial theory of the multinational enterprise," Industrial and Corporate Change, Oxford University Press, vol. 19(4), pages 1247-1270, August.
    8. Storchevoy, Maxim A., 2010. "A general theory of the firm: From Knight to relationship marketing," Working Papers 765, Graduate School of Management, St. Petersburg State University.
    9. repec:spr:elmark:v:27:y:2017:i:2:d:10.1007_s12525-017-0253-6 is not listed on IDEAS
    10. Christos Pitelis, 2013. "Towards a More ‘Ethically Correct’ Governance for Economic Sustainability," Journal of Business Ethics, Springer, vol. 118(3), pages 655-665, December.
    11. Irina-Elena Gentimir, 2013. "The Role Of The International Economic Organizations And The Public Sector In Creating And Sustaining International Competitiveness," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 5(3), pages 378-387, September.
    12. Jell-Ojobor, Maria & Windsperger, Josef, 2014. "The Choice of Governance Modes of International Franchise Firms — Development of an Integrative Model," Journal of International Management, Elsevier, vol. 20(2), pages 153-187.
    13. repec:eee:rujoec:v:2:y:2016:i:1:p:86-110 is not listed on IDEAS
    14. Christos N. Pitelis & Pellumb Kelmendi, 2011. "European Industrial Policy: Perspectives, Trends and a Sustainability-focused New Framework," Chapters,in: International Handbook on the Economics of Integration, Volume II, chapter 2 Edward Elgar Publishing.
    15. Pitelis, Christos & Kelmendi, Pellumb, 2009. "The political economy of European anti-trust and industrial policy," MPRA Paper 23941, University Library of Munich, Germany.
    16. Teece, David J., 2010. "Technological Innovation and the Theory of the Firm," Handbook of the Economics of Innovation, Elsevier.
    17. Kyläheiko, Kalevi & Jantunen, Ari & Puumalainen, Kaisu & Luukka, Pasi, 2011. "Value of knowledge--Technology strategies in different knowledge regimes," International Journal of Production Economics, Elsevier, vol. 131(1), pages 273-287, May.
    18. Pitelis, Christos, 2009. "Edith Penrose’s ‘The Theory of the Growth of the Firm’ Fifty Years Later," MPRA Paper 23180, University Library of Munich, Germany.
    19. Teece, David J., 2016. "Dynamic capabilities and entrepreneurial management in large organizations: Toward a theory of the (entrepreneurial) firm," European Economic Review, Elsevier, vol. 86(C), pages 202-216.
    20. Pätäri, Satu & Kyläheiko, Kalevi & Sandström, Jaana, 2011. "Opening up new strategic options in the pulp and paper industry: Case biorefineries," Forest Policy and Economics, Elsevier, vol. 13(6), pages 456-464, July.
    21. Alves, Helena & Fernandes, Cristina & Raposo, Mário, 2016. "Value co-creation: Concept and contexts of application and study," Journal of Business Research, Elsevier, vol. 69(5), pages 1626-1633.
    22. Rayna, Thierry & Striukova, Ludmila, 2016. "From rapid prototyping to home fabrication: How 3D printing is changing business model innovation," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 214-224.

    More about this item

    Keywords

    firm; nature; essence; innovation; dynamic capabilities;

    JEL classification:

    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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