Sunday, 17 August 2014

Books on the firm

When thinking about the history of the theory of the firm, as we all do early on a Sunday morning, I've been thinking about which books are really important to the subject and thus are actually worth reading. Many of the major contributions to the theory of the firm have come in the form of journal articles. Economists are not big on writing books.

But what books are worth reading to get an understanding of the contemporary (post-1970) mainstream theory of the firm? Well here's my list.

Two books which contain the classics on which most of the contemporary theories are based are:
  1. Knight, Frank H. (1921). Risk, Uncertainty and Profit, Boston: Houghton Mifflin Company. This is a book that is getting an increasing amount of attention. Albeit very late in the piece
  2. Oliver E. Williamson and Sidney G. Winter (eds.) (1993). The Nature of the Firm: Origins, Evolution, and Development, New York, Oxford: Oxford University Press. This includes a reprint of Coase's 1937 classic "The Nature of the Firm". It also includes reprints of Coase's three essays on the Origin, Meaning and Influence of his 1937 paper as well as his Noble Lecture: "The Institutional Structure of Production".
When it comes to the important books that the classics gave rise to, there are a few. An obvious place to start is with three books by Oliver Williamson. These develop the transaction cost approach to the firm:
  1. Williamson, Oliver E. (1975). Markets and Hierarchies: Analysis and Antitrust Implications, New York: The Free Press.
  2. Williamson, Oliver E. (1985). The Economic Institutions of Capitalism, New York: The Free Press.
  3. Williamson, Oliver E. (1996). The Mechanisms of Governance, Oxford: Oxford University Press.
To cover the property rights approach to the firm there is:
  1. Hart, Oliver D. (1995). Firms, Contracts, and Financial Structure, Oxford: Oxford University Press.
As to the reasons for, and the shortcomings of, different forms of ownership of firms see Henry Hansmann's book:
  1. Hansmann, Henry (1996). The Ownership of Enterprise, Cambridge, Mass.: Harvard University Press.
A number of interesting essays appear in this book by Harold Demsetz:
  1. Demsetz, Harold (1995). The Economics of the Business Firm: Seven Critical Commentaries, Cambridge: Cambridge University Press.
Two recent books that may have influence in the future due to their integration of the theory of the entrepreneur with the theory of the firm are:
  1. Spulber, Daniel F. (2009). The Theory of the Firm: Microeconomics with Endogenous Entrepreneurs, Firms, Markets, and Organizations, Cambridge: Cambridge University Press.
  2. Foss, Nicolai J. and Peter G. Klein (2012). Organizing Entrepreneurial Judgment: A New Approach to the Firm, Cambridge: Cambridge University Press.
I'm sure there are a few others I have missed.


Afifah said...

Thank you very much. I'm a PhD student from Malaysia. Currently my interest is to find out about the unification of theory of the firm from Islamic worldview (specifically 'Tawhidic paradigm'). By acknowledging the contributions of the theory of the firm until today, I try to explore for the unification from Islamic worldview to see how it can fill up the shortcomings with the moral hazards,ethics, integrity, or sustainability issues of the firm. Welcome any comments from you.

Nur Afifah

Paul Walker said...

The only thing I have come across in anyway related to this would be the discussion that Timur Kuran gives of the effects of the absence of the corporation in Islamic Law in his book "The Long Divergence: How Islamic Law Held Back the Middle East", Princeton: Princeton University Press, 2011.