The Modern Firm, Corporate Governance and Investment
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The Modern Firm, Corporate Governance and Investment

Edited by Per-Olof Bjuggren and Dennis C. Mueller

This book explores the revolutionary development of the theory of the firm over the past 35 years. Despite rapid progress in the field, new developments in the microeconomic and industrial organization literature have been relatively scant. This book attempts to redress the balance by providing a comprehensive overview of the theory of the firm before moving on to examine firms and the organization of their economic activities. The contributors also investigate the impact of ownership structure and board composition on firm performance and study how the institutional framework of an economy affects investment decisions.
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Chapter 4: A Contractual Perspective of the Firm with an Application to the Maritime Industry

Per-Olof Bjuggren and Johanna Palmberg


Per-Olof Bjuggren and Johanna Palmberg* 1. INTRODUCTION In 1776 Adam Smith developed a theory for markets as the coordinating device in an economy. However, economic activities are not only coordinated through the price mechanism of the market but are also guided by firms within which the production of goods and services takes place. In contrast to markets the firm is not so well developed in economic theory. This is reflected, for example, in basic economic textbooks that usually assume the firm as something exogenously given that need not be explained or analyzed. After acknowledging the existence of firms, textbooks quickly turn to the market and analyze its importance for a well-functioning economy.1 However, since the early 1970s there has been rapidly expanding research on the theory of the firm, largely inspired by an article dating back to 1937 about the nature of the firm written by the Nobel laureate, Ronald H. Coase. However, it took more than thirty years for researchers to draw inspiration from the ideas put forward by Coase. In the 1970s (primarily) Oliver E. Williamson continued along the line of research that Coase had outlined. Since then theories of the firm have been a new expanding area of research in economics. In this chapter, a contractual perspective on the firm is used, with the concept of institution being an important cornerstone, and a synthesis of different contractual perspectives on the firm as the coordinating institution within the maritime industry. This chapter recognizes the fact that the firm...

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