A Theory of Large Managerial Firms

2 See R. L. Hall and C. J. Hitch, "Price Theory and Business Behaviour," Oxford Economic Papers, May, 1939; B. Higgins, "Elements of Indeterminacy in the Theory of Non-Profit Competition," American Economic Review, September, 1939; T. Parsons, "The Motivations of Economic Activity," Canadian Journal of Economics and Political Science, May, 1940; K. W. Rothschild, "Price Theory and Oligopoly," Economic Journal, September, 1947; M. W. Reder, "A Reconsideration of the Marginal Productivity Theory," Journal of Political Economy, October, 1947; W. Fellner, Competition among the Few (New York: Alfred A. Knopf, 1949); George Katona, Psyckological Analysis of Economic Behaviors (New York: McGraw-Hill Book Co., 1951); K. E. Boulding, "Implications for General Economics of More Realistic Theories of the Firm," American Economic Review, Supplement, May, 1952; T. Scitovsky, "A Note on Profit Maximization and Its Implications," reprinted in Readings in Price Theory (flomewood, Ill.: Richard D. Irwin, Inc., 1952); A. A. Papandreau, "Some Basic Problems in the Theory of the Firm," in B. F. Haley (ed.), A Survey article attempts to propound a more realistic alternative applicable to large corporate firms. In our opinion, the traditional theory of the firm really deals with only one type of firm: the small, owner-managed firm. But since the inception of this theory, several other types of firms have come into being that differ from the traditional type in both owner-management relationships and size. Moreover, these other types of firms are now economically more significant than the traditional type in terms of the magnitude of the resources which they control. Distinguishing between types of firms is important because the behavior of each firm with respect to profits depends upon certain elements of its internal