Abstract

The firm is a real entity and not an imaginary, fictitious or linguistic entity. This implies that the firm as a whole exhibits a sufficient degree of unity or cohesiveness and is durable and persistent through time. The firm is essentially composed of a particular combination of constituents that are bound together by something that acts as an ontological glue, and is therefore non-reducible to other more basic entities, i.e., to its parts or its members. From our perspective, the firm is not simply an aggregate or a collection. It is a real integrated entity and a dynamic causal system. Institutional and organizational aspects enter the picture. These assertions stand in sharp contrast with mainstream theories of the firm whose proponents are more preoccupied with questions of contractual provisions, vertical integration or opportunism than the general and more fundamental questions related to what firms really are.