ABSTRACT
A view on systemic coordination cannot be side stepped in an economic theory of the firm. This chapter explores the relationship between the firm and its environment. It argues that in the same way that uncertainty necessitates a reconceptualisation of the firm, it is also necessary to firm up the notion of the firm’s environment. Passive firms inhabit environments but powerful firms construct ecosystems. The environment of the firm is fundamentally unstable but the ecology of the firm is stable by design, with both intended and unintended consequences. The ‘norms’ of interaction for firms are neither substitutable for contracts nor are they anything other than purely economic norms in a pecuniary environment. These are the spaces that are specifically ecological. To say that firms exist in ecologies that they construct themselves is to say that there is an economic domain external to the firm for which contracts cannot be written at all but which has fundamental bearing on the ones that are and can be.
