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Reconceiving The Firm, Reza Dibadj

Reza Dibadj

Despite their seemingly sophisticated economics, existing theories of the firm have made for poor public policy, as witnessed by recurrent crises in corporate governance. This Article identifies and begins to remedy this gap. It argues that to make sense of organizational behavior, the firm needs to be reconceptualized as an entity that evolves norms within a social construct. Orthodox economic models of the firm remain focused on microanalytic equilibria drawn from assumptions of rationality. Institutional economics persists in erroneously modeling the firm as a series of efficient contracts. Behavioral economics treats the individual, not the firm, as the unit of …