This possibility rather clearly indicates
a broader, or complementary, approach
to that which we have chosen. 1) As we do
in this paper, it can be argued that the
firm is the particular policing device
utilized when joint team production is
present. If other sources of high policing
costs arise, as in the wheat case just indicated,
some other form of contractual arrangement
will be used. Thus to each
source of informational cost there may be
a different type of policing and contractual
arrangement. 2) On the other hand, one
can say that where policing is difficult
across markets, various forms of contractual
arrangements are devised, but there is
no reason for that known as the firm to be
uniquely related or even highly correlated
with team production, as defined here. It
might be used equally probably and viably
for other sources of high policing cost. We
have not intensively analyzed other
sources, and we can only note that our
current and readily revisable conjecture
is that 1) is valid, and has motivated us in
our current endeavor. In any event, the
test of the theory advanced here is to see
whether the conditions we have identified
are necessary for firms to have long-run
viability rather than merely births with
high infant mortality. Conglomerate firms
or collections of separate production agencies
into one owning organization can be interpreted
as an investment trust or investment
diversification device-probably
along the lines that motivated
Knight's interpretation. A holding company
can be called a firm, because of the
common association of the word firm with
any ownership unit that owns income
sources. The term firm as commonly used
is so turgid of meaning that we can not
hope to explain every entity to which the
name is attached in common or even technical
literature. Instead, we seek to identify
and explain a particular contractual
arrangement induced by the cost of information
factors analyzed in this paper.
This possibility rather clearly indicates
a broader, or complementary, approach
to that which we have chosen. 1) As we do
in this paper, it can be argued that the
firm is the particular policing device
utilized when joint team production is
present. If other sources of high policing
costs arise, as in the wheat case just indicated,
some other form of contractual arrangement
will be used. Thus to each
source of informational cost there may be
a different type of policing and contractual
arrangement. 2) On the other hand, one
can say that where policing is difficult
across markets, various forms of contractual
arrangements are devised, but there is
no reason for that known as the firm to be
uniquely related or even highly correlated
with team production, as defined here. It
might be used equally probably and viably
for other sources of high policing cost. We
have not intensively analyzed other
sources, and we can only note that our
current and readily revisable conjecture
is that 1) is valid, and has motivated us in
our current endeavor. In any event, the
test of the theory advanced here is to see
whether the conditions we have identified
are necessary for firms to have long-run
viability rather than merely births with
high infant mortality. Conglomerate firms
or collections of separate production agencies
into one owning organization can be interpreted
as an investment trust or investment
diversification device-probably
along the lines that motivated
Knight's interpretation. A holding company
can be called a firm, because of the
common association of the word firm with
any ownership unit that owns income
sources. The term firm as commonly used
is so turgid of meaning that we can not
hope to explain every entity to which the
name is attached in common or even technical
literature. Instead, we seek to identify
and explain a particular contractual
arrangement induced by the cost of information
factors analyzed in this paper.
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