ABSTRACT
The mainstream theory of the firm did not exist, in any meaningful way, until around 1970. It was only then that the current theory of the firm literature began to emerge, based largely upon the work of Ronald Coase – Coase (1937) – and to a lesser degree Frank Knight – Knight (1921). It was work by Oliver Williamson (see, for example, Williamson 1971, 1973, 1975), Alchian and Demsetz (1972), Jensen and Meckling (1976) and Klein, Crawford and Alchian (1978), among others, that drove the upswing in interest in the firm among mainstream economists. Before then there was no great interest shown in the firm as a significant economic institution by any school of economic thought. What literature there was constituted, essentially, the ‘prehistory’ of the theory of the firm. For more than two thousand years tools were available that could have given rise to a theory of the firm but none appeared. During this time the best that occurred were discussions of micro-level production, and that only after 1930, while before then the deliberations that did transpire, limited though they were, were more focused on macro-level or aggregate production.
