ABSTRACT
This chapter concerns a general way with the theory of the firm, the firm in the real world economy and the relationship between them. It discusses the history of the traditional theory of the firm is briefly traced as a means of bringing out the assumptions and methods of analysis on which it is based, the objections that have been made to these and the alterations that have been proposed. The chapter examines some of the characteristics of firms of which any theory must prima facie be expected to take account. One of these is the corporate institutional form of the modern firm. It analyses the relationship between ownership, control, objectives and behaviour an – issue that arises in the corporate context and also in the context of worker-managed enterprises. The chapter outlines the behavioural theory – perhaps the most radical break with the traditional theory to have gained currency.
