THEORIES OF BUSINESS BEHAVIOUR AND THE DISTRIBUTION OF SURPLUS PROFITS

Abstract

SUMMARYThis paper attempts a partial reformulation of the theory of the firm around the central issue of the distribution of profits. According to the institutional, market and purchasing environment in which they operate, the firms can generate surplus profits. Depending on their bargaining strength participants in the firm viz.– management, shareholders, customers, labour and suppliers of other inputs – can share in this surplus by securing payments above opportunity costs. The paper (i) presents a taxonomy of business conduct for incorporating the distribution of profits into existing explanations (ii) examines the extent to which these explanations require modification if this is done, (iii) explores the determinants of the relative bargaining strengths of the stakeholders, and (iv) suggest some implications for future studies of business behaviour.