ABSTRACT
Compared to economics, management theory is a relatively new discipline. The question of why firms exist and what they set out to achieve did not attract serious study until the turn of the twentieth century. Although the nature of firms and management has changed considerably (especially in the last 30 years, as this essay will show), some of the earliest theories about a firm’s raison d’être have proved quite resilient. The two which underpin much of later management theory-and practice-are:
● the neo-Classical argument that a firm’s goal is profit maximization; ● the transaction costs theory of the firm, put forward originally by the economist and
management theorist Ronald Coase.
