Why do different theories of the firm exist Essay

Why do different theories of the firm exist - screen ExampleThis paper examines a couple of firm theories with the objective of examining their fine and major points and in an attempt to discover what factors have prompted existence and development of quaternary theories of the firm. This is achieved through a literature redirect examination that incorporates a wide ranging discussion on the main issues as outlined above. In addition, this paper extends the literature review in an attempt to find empirical root word for the existence of the multiple theories of the firm. In order to do this, the paper examines the literature studies that examine such inessential data evidence either cross sectional or case study based.There is a wide body of research that deals with the issue of firms and theories of firms two in the realms of economics and management. Sagi & Pataki (2006) give out the classical economic firm theory in following words, Classical firm theories in deterrent exam pleing bear strategies start from profit maximizationrevenue, i.e. PMR=MC.However, these authors discredit the relevance and universal applicability of this model and went on to rationalize the further developments in the firm models that increasingly took into account more variables ,essentially focusing on firm behaviours as an economic decision maker. ... rs discredit the relevance and universal applicability of this model and went on to explain the further developments in the firm models that increasingly took into account more variables ,essentially focusing on firm behaviours as an economic decision maker. However, this paper has emphasis on examination of firm theories that lean more towards more elaborate and comprehensive models that ar more management oriented in the sense of having a strategical management bias. The advantage of doing this is evident in that such models reveal more of the strategic management processes that reveal the cross section of todays large siz ed, globalized and information engine room assisted business organizations, one such model is the Resource based model of the firm behaviour. Citing appropriate literature resources Kotelnikov (2007) explains the plan of the resource based model of firm behaviour in following words, The currently dominant view of business strategy - resource-based theory or resource-based view (RBV) of firms - is based on the concept of economic rent and the view of the company as a collection of capabilities. This view of strategy has a coherence and integrative role that places it well forrard of other mechanisms of strategic decision making. (Kay John). Using more literature resources Kotelnikov further explains the model as follows, Each organization is a collection of unique resources and capabilities that provides the basis for its strategy and the primary source of its returns. In the 21st-century hyper-competitive landscape, a firm is a collection of evolving capabilities that is managed dynamically in pursuit of above-average returns (Markides C.C). Thus, differences in firms performances across time are driven primarily by their unique resources