Abstract
The theory of the firm, as we know it from the literature, focuses on the boundary question. Recently, the idea of ecosystems, an organizational arrangement that lies somewhere between the firm and the market poles, has been promoted as an adequate response to the ongoing trend of digitalization (Jacobides, Cennamo, & Gawer, 2018). What is missing in the extant literature is an answer to or reflection on the normative question of what role business firms should or could play in modern societies, where major (“grand”) challenges such as climate change, poverty, migration, and rising inequality are seen (George, Howard-Grenville, Joshi, & Tihanyi, 2016). Thus, a core element of the traditional theory of the firm has been neglected, with the consequence that its social relevance is no longer evident. We focus on the strategic management discipline, with an aim to reintroduce the lost normative perspective and to provide a guideline for future theorizing about business firms as well as guidelines for practice. The three cornerstones of our framework are (de-) growth, sustainability, and digitalization. We emphasize the digitalization angle and elaborate on what we call the “common good orientation” of digitalization, using the key terms “internet as a commons”, “open-source”, and “cooperative platforms”
Highlights
It is often argued that the central question of the so-called theory of the firm is the boundary question, the question of whether a transaction is more effectively governed within firms, within markets, or within organizational arrangements somewhere between these two poles (Zenger, Felin, & Bigelow, 2011)
Taking it to the extremes, we find that strategic management and its theory of the firm should remain open on whether it is growth or the opposite, de-growth, that better fuels a firm’s prosperity
The need for a socio-ecological transformation and for firm-level strategic and organizational change has an empirical counterpart in the ongoing development of the overall economic system. This theory of the firm framework suggested in this paper does not replace the conventional considerations of the theory of the firm
Summary
It is often argued that the central question of the so-called theory of the firm is the boundary question, the question of whether a transaction is more effectively governed within firms, within markets, or within organizational arrangements somewhere between these two poles (Zenger, Felin, & Bigelow, 2011). This call highlights the market, firm, and intra-firm levels as the relevant levels of analysis; in particular, it focuses on the emergence of new industries and the formation of ecosystems that will shift the boundaries of the enterprise, thereby creating new management and knowledge-sharing needs As inspiring as these boundary-focused approaches are, we argue that one important element is often missing in extant literature: an answer to — or at least, a reflection on — the normative question of what role business firms should or could play in modern societies that are faced with major (“grand”) challenges, such as climate change, poverty, migration, and rising inequality (George, Howard-Grenville, Joshi, & Tihanyi, 2016).
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