Purpose and scope

This book addresses the properties, behaviour and growth of the firm. A ‘firm’ is defined here as a social organisation and an autonomous legal entity that produces and sells goods or services by means of a set of human, physical and financial resources that are coordinated, combined and monitored under an administrative structure. Although the focus of this book is on business organisations, its main conclusions largely concern the ‘economic reasons’ for all social organisations. Organisations undeniably represent a ubiquitous and dominant presence in what is usually called the ‘market economy’. The efficiency of the ‘market economy’ depends to a very considerable extent on how social organisations operate.

Since the 1980s, the literature on the theory of the firm has expanded, following numerous lines of research and offering differing interpretations of the nature of the firm. I do not propose here to provide a survey of this fast-growing literature. Rather, this book examines how the relations between basic conditions, decision-making mechanisms and organisational coordination within firms influence their relative performance. The present study pursues the avenue of research started with my Production Process and Technical Change (Morroni, 1992), moving from analysis of the temporal, organisational and qualitative dimension of production toward a new analytical framework based on a cognitive perspective that also encompasses transaction and scale considerations. This makes it possible to overcome the traditional disjunction between the capabilities, transaction costs and scale‒scope analyses which so far have generally been treated within separate theoretical approaches.