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What is a Firm? A Reply to Jean-Philippe Robé

Author

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  • Simon Deakin
  • David Gindis
  • Geoffrey M. Hodgson

Abstract

In his recent book on Property, Power and Politics, Jean-Philippe Robé makes a strong case for the need to understand the legal foundations of modern capitalism. He also insists that it is important to distinguish between firms and corporations. We agree. But Robé criticizes our definition of firms in terms of legally recognized capacities on the grounds that it does not take the distinction seriously enough. He argues that firms are not legally recognized as such, as the law only knows corporations. This argument, which is capable of different interpretations, leads to the bizarre result that corporations are not firms. Using etymological and other evidence, we show that firms are treated as legally constituted business entities in both common parlance and legal discourse. The way the law defines firms and corporations, while the product of a discourse which is in many ways distinct from everyday language, has such profound implications for the way firms operate in practice that no institutional theory of the firm worthy of the name can afford to ignore it.

Suggested Citation

  • Simon Deakin & David Gindis & Geoffrey M. Hodgson, 2021. "What is a Firm? A Reply to Jean-Philippe Robé," Working Papers wp531, Centre for Business Research, University of Cambridge.
    • Handle: RePEc:cbr:cbrwps:wp531
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    Keywords

    firms; theory of the firm; business corporations; legal personality; legal;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • D20 - Microeconomics - - Production and Organizations - - - General
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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