Economics of the firm and economic growth: a hybrid theoretical framework of analysis

Abstract

The main goal of this study is to achieve a critical discussion around the conceptualization of the firm and its role in the dynamic process of economic growth. By reviewing the theoretical matrix of the economics of the firm we go beyond the mainstream economics of the firm proposing a hybrid approach combining evolutionary and population ecology, which is likely to constitute a fruitful path for the conceptualization of the firm in the process of economic growth. Specifically, the analysis confronts the distinct theoretical perspectives around some imperative and controversial issues such as the nature of knowledge and learning and the cognitive capacities of economic agents within the firm. We argue that the economic understanding of growth and development of human societies will strongly benefit from a conceptualization of the firm capable of capturing the spirit of the Knightian firm. Overcoming the shortcomings of the mainstream growth models, which conceive firms as a black box, the proposed hybrid approach recalls the true nature of the firm as an organization. Issues related to the organizational arrangements that sustain the feasibility of productive activities and to the incentive contracts are also taken into account. Although acknowledging some recent important contributions within mainstream economic growth theory to adopt more realistic concepts of the firm, we believe that evolutionary and organizational population perspectives include crucial pointers in developing further research aimed at the construction of economic growth models based on a micro-economic perspective that is closer to the reality of firms.