The Firm

The book addresses the entrepreneurial origin of the capitalist firm and its asymmetric contractual relationships between capitalists, workers, managers and entrepreneurs, and explains the origin of the firm by focusing on entrepreneurship.

Hard rock supergroup the Firm united former Led Zeppelin guitarist Jimmy Page with onetime Free and Bad Company frontman Paul Rodgers; bassist Tony Franklin and ex-Uriah Heep drummer Chris Slade completed the lineup, founded in 1984. The Firm is their eponymous debut studio album, released by Atlantic Records on 11 February 1985….

The book addresses the entrepreneurial origin of the capitalist firm and its asymmetric contractual relationships between capitalists, workers, managers and entrepreneurs, and explains the origin of the firm by focusing on entrepreneurship. A hidden action model shows how assigning residual claim to entrepreneurs can provide a better overall incentive; a hidden information model demonstrates that capitalists are given priority and have authority to select the management, because capital can signal entrepreneurial ability; and a general equilibrium entrepreneurial model shows that the equilibrium relationships between different members of the firm depend on the joint distribution of ability, wealth and risk attitudes in the population. Overall, the book reveals that the capitalist firm is more efficient, not only because it provides better incentives but also because it ensures that the most entrepreneurial people control the firm.

by Birger Wernerfelt (Author)