Abstract
What is the purpose of business? While most agree that business minimally involves the creation of value, a blurred double image of value haunts our discussion of purpose. The image of what counts as value for a single firm is laid atop an image of what counts as value for business in general. These two images cannot match. Indeed, the resulting conceptual blurriness is a classic example of a composition fallacy. We should never mistake the properties of a part for the properties of the whole. A theory of the firm is ill equipped to handle the many expectations we hold for business practice. As such, we seek to establish the beginnings of a theory of business, one that is both empirical and normative. Offering four central propositions about the purpose, accountability, control and success of business, we close with a consideration of several important theoretical issues and practical opportunities that await us in the years ahead.
Highlights
What is the purpose of business? While most agree that business minimally involves the creation of value, a blurred double image of value haunts our discussion of purpose
Offering four central propositions about the purpose, accountability, control and success of business, we close with a consideration of several important theoretical issues and practical opportunities that await us in the years ahead. ß 2015 The Authors
We need a theory that can answer the riddle posed at the beginning of this work: ‘‘Law is to justice, as medicine is to health, as business is to _____?’’ Absent such a theory, we suffer a fallacy of composition
Summary
What is the purpose of business? While most agree that business minimally involves the creation of value, a blurred double image of value haunts our discussion of purpose. A theory of the firm is ill equipped to handle the many expectations we hold for business practice. Offering four central propositions about the purpose, accountability, control and success of business, we close with a consideration of several important theoretical issues and practical opportunities that await us in the years ahead. Working from a set of definitions that give precision to such everyday concepts as value, dignity and business success, our goal is to develop a theory with both normative and empirical relevance. Economic and business activity can certainly make the world a better place.
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