Why do firms exist, anyway?

The Economist published great article. Why do firms exist? In some other place I read once that the company the customers would miss the most is BMW.

The article was honouring the Nobel prize winner for economy, Ronald Coase.

Why do firms exist, anyway - Ronald Coase


There are three things I learned from the article:

Mr. Coases theory of “market failure” explains why highly diversified business groups in emerging markets succeed. For example India‘s Tate Group and Turkey‘s Koc Holding.

On the other hand the neo-Coases school argues that firms succeed also because they can marshal a wide range of resources – including such nebulous as “corporate culture” and “collective knowledge”.

And I would like to add one other thing. Michael Porter was not arguing for the business diversification quite the opposite. But he had long time ago admitted that a strong sense of corporate identity is as important as slavish adherence to business units’ financial results if a corporate strategy is to be successful. And corporate culture is an important part of corporate identity.

The Economist, December 18th, 2010. Web post available at: http://www.economist.com/node/17730360
M. Porter in Harvard Business Review, 2001: From competitive advantage to corporate strategy.

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