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.
Ronald Coase via The University of Chicago Law School
From the article I learned three things:
- Mr. Coases theory of “market failure” explains why highly diversified business groups in emerging markets succeed -like 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.
Sources:
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.
Tags: BMW, Business, Corporate culture, Corporate identity, Economist, India, Koç Holding, Michael Porter, Nobel Prize, Our bookshelf, Ronald Coase, Turkey
