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What is a firm? A reply to Jean-Philippe Robé

Published online by Cambridge University Press:  03 June 2021

Simon Deakin ,
David Gindis Open the ORCID record for David Gindis [Opens in a new window]  and
Geoffrey M. Hodgson
Simon Deakin
Affiliation:
Faculty of Law and Centre for Business Research, University of Cambridge, Cambridge, UK
David Gindis
Affiliation:
Hertfordshire Business School, University of Hertfordshire, Hatfield, UK
Geoffrey M. Hodgson*
Affiliation:
Loughborough University London, Institute of International Management, Stratford, London, UK
*
*Corresponding author. Email: [email protected]
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Abstract

In his recent book on Property, Power and Politics, Jean-Philippe Robé makes a strong case for the need to understand the legal foundations of modern capitalism. He also insists that it is important to distinguish between firms and corporations. We agree. But Robé criticizes our definition of firms in terms of legally recognized capacities on the grounds that it does not take the distinction seriously enough. He argues that firms are not legally recognized as such, as the law only knows corporations. This argument, which is capable of different interpretations, leads to the bizarre result that corporations are not firms. Using etymological and other evidence, we show that firms are treated as legally constituted business entities in both common parlance and legal discourse. The way the law defines firms and corporations, while the product of a discourse which is in many ways distinct from everyday language, has such profound implications for the way firms operate in practice that no institutional theory of the firm worthy of the name can afford to ignore it.

Keywords

Business corporationsfirmslegal institutionalismlegal personalitytheory of the firmB52D20K10L20
Type
Note
Information
Journal of Institutional Economics , Volume 17 , Issue 5 , October 2021 , pp. 861 - 871
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of Millennium Economics Ltd.

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