Firms, Organizations and Contracts: A Reader in Industrial Organization

By Peter J. Buckley; Jonathan Michie | Go to book overview
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II. MARKETS AND INDUSTRIAL ORGANIZATION

Just as the readings in Section I demonstrate that the concept of the 'firm' is not a simple one, so the readings in Section II demonstrate that the same is true for the concept of the 'market'. Supposedly market processes are repeatedly found to be highly organized events with, in the words of the title of the piece from Imai and Itami, a degree of 'interpenetration of firm and market'. The question of 'what is a firm?' was presented above with the alternative to the firm being the individual undertaking productive activities alone (contracting via the market). The distinction in this section is not between the firm and the individual but rather between the firm and the market. The question then arises whether a clear dichotomy really exists between a production process organized consciously by a firm, on the one hand, and a market process guided by an invisible hand on the other? Once again, there is found to be no clear dichotomy; rather, the organization of industry is characterized by a range of cooperative arrangements and agreements between firms, in the market (as analysed in the paper by Mariti and Smiley). No clear dichotomy exists between the integrated firm and the disintegrated market, but rather a range of quasi-integration is found, with many activities being neither contracted for simply through the market nor organized internally by firms, but rather as a result of agreements across firms (as analysed in the context of vertical quasi-integration in the paper by Blois).

Thus, the idea that the 'market' is something necessarily quite distinct and separate from productive activities which result from conscious, human organizational efforts, needs to be discarded. So too should the idea of an

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Firms, Organizations and Contracts: A Reader in Industrial Organization
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