Order Now
Menu
  Back to all posts Other Essays

Why Do Firms Exist?

by Expert Marvellous | 22 May 2017

If markets are unanimously supposed to be the most proficient organizational arrangement and do not need the existence of firms for tackling scarcity, then why do firms exist at all? Ahead of the traditional theory of the firm as a profit-maximizing unit, an additional theory has developed to deal with the question of why firms exist. This hypothesis is not incorporated in most micro theory texts and course materials. For the most part frequently firms are assumed as an indispensable nonconformist building block of the economy without further explanation. The existence question of firms is never raised. A theory intending to clarify the existence of firms has been developed and can be seen as a discrepancy of the alternatives argument. (Foss, 2005) The premise that government substitutes for markets when they fall short to organize economic activity economically can be unmitigated to firms. Firms may come into existence to antidote noteworthy aspects of market failure.

Need essay sample on

"Why Do Firms Exist?" topic?

We will write a custom essay sample specifically for you

Proceed

Jointly the substitutes quarrelsome arrangement of mainstream political economy and the substitutes commencement of the firm would suggest the broad outlines of a substitutes theory of institutions in economics. A substitutes theory of institutions would assume that other forms of organized economic activity are, like the government and the firm, derivatives of and substitutes for competitive markets. (Huff, 2000)

Markets are chosen as the paramount solution to the trouble of scarcity. Certainly markets fall short. Other institutional structures come into subsistence to recompense for the insufficiencies of markets. In this scrutiny, these other institutional structures undoubtedly would not exist if markets were unanimously triumphant in organizing human activity.

Why do firms exist? This is a question avoiding by the substitutes confrontational structure which permeates approximately all of the academic literature in the economics profession. Think about the most essential assumptions of economic analysis. In conventional economics, the fundamental suppositions of economic theory come into view to hypothesize the survival of shortage and markets but not firms. Scarceness is a substantive intention about the character of the real world. (Dunning, 2001) It identifies a basic limitation of resources, incomes, and products accessible for human utilization and fabrication. Markets assist us manage with scarcity. In addition, markets can purpose without firms. Thus the scarcity-coping function of markets can be attained without firms.

References

  • Dunning, J. H. & Mucchielli, J. (Eds.). (2001). Multinational Firms: The Global-Local Dilemma. London: Routledge.
  • Foss, N. J. (2005). Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources. Oxford, England: Oxford University Press.
  • Huff, A. S., Huff, J. O., & Barr, P. S. (2000). When Firms Change Direction. New York: Oxford University Press.
Learn more:
Why People Cheat? Why Do People Commit Crime Why Do People Hate America

Do You need a paper on this topic?

Order Your Essay
Writer avatar

Professor Louis

№14 In global rating

230

finished papers

146

customer reviews

96%

success rate

Writer avatar

Prof. Ellie

№2 In global rating

33

finished papers

28

customer reviews

100%

success rate

Writer avatar

Dr. Kalee

№16 In global rating

256

finished papers

156

customer reviews

99%

success rate

Writer avatar

Prof.Noor (PhD)

№12 In global rating

90

finished papers

49

customer reviews

98%

success rate

Writer avatar

Intelligent Dr

№19 In global rating

1983

finished papers

1234

customer reviews

95%

success rate

Writer avatar

Marvellous

№18 In global rating

1736

finished papers

1057

customer reviews

96%

success rate

Writer avatar

Amalia (Ph.D)

№5 In global rating

114

finished papers

75

customer reviews

100%

success rate

Writer avatar

Louis(PhD)

№15 In global rating

95

finished papers

71

customer reviews

100%

success rate

Writer avatar

Sakira

№3 In global rating

30

finished papers

22

customer reviews

100%

success rate

Writer avatar

Karen Steve

№9 In global rating

85

finished papers

60

customer reviews

95%

success rate

Order your paper now!

I need
My email
By clicking “Continue”, you agree to our terms of service and privacy policy. We’ll occasionally send you promo and account related emails.

EssayLab Reviews

  • Jason (student)

    I asked Essay Lab to write an essay for me and received paper the next day after I ordered it! Thank you!

  • Kimberly (student)

    Awesome WORK! If I ever need to write my essay – I will use only EssayLab!

  • Matt (student)

    These people are lifesavers! Just ask – “write me an essay” and they will start right away!

Support contacts

[email protected]