Theories of the Firm

Theories of the Firm explore why companies exist, how they make decisions, and what determines their structure. They examine factors such as minimizing costs, maximizing profits, and balancing risks and resources. For example, some theories suggest firms grow to gain market power or reduce transaction costs, while others focus on specialization and efficiency. These ideas help us understand how businesses operate within markets, make strategic choices, and adapt to changing economic conditions. Overall, they provide a framework for analyzing the motivations and behaviors of firms in various economic environments.