Origin of Modern Corporations: Time-Cost Approach

Abstract

The functioning of a modern corporate system has not been adequately explained. The economic factors that lie behind the size, shape and performance of the modern corporations, however, are poorly understood. The failure to understand the main purpose of the corporation has been the source of much confusion and ill-conceived public policy and the unsatisfactory state of the theory of the firm. The whole superstructure of the theory of the firm has been built on the foundation of the "firm". Since the Modern Corporation and Multinational Corporations is only an offshoot of the "firm", it becomes essential to know the economic rationale for or origin of the firm. Various reasons like cost-reduction, teamwork, uncertainty, and economization of transaction costs, were put forth for the origin of the firm. This paper proposes time-cost approach to explain the birth of firm, for that matter any organization whether traditional or modern corporation or conglomerates of any size and structure, and answers the questions raised by O.E.Williamson as well.