Firms as Social Actors

This essay asks what firms are, whether they are ‘real’ social actors, and whether their actions can be traced without remainder to the actions of living people or whether there is some irreducible aspect of their existence or operation that must be attributed to the organization itself. It describes firms as ongoing, multilateral relational contracts from whose operation – that is, from performance over time by specific individuals in the roles and relationships defined by the contract – emerge the firm’s idiosyncratic routines and capabilities. It emphasizes the role of entrepreneurs in the creation of firms and the close dependence of organizational capabilities on human performance, and argues that this account is consistent with a reasonable individualism that allows for social outcomes to be determined by the actions and interaction of individuals. It then proposes that firms are nonetheless institutional facts and thus ontologically subjective but epistemically objective components of reality, and concludes with directions for future work. Scholars and jurists have long puzzled over how to think about organizations, associations of individuals characterized by one or a very few governing objectives and, generally, some sort of central plan designed to achieve them. This is particularly true of business firms, organizations dedicated to the production and sale of goods for profit. Social scientists have not yet resolved the interrelated ontological and epistemological questions of just what these ubiquitous social objects are, whether and in what sense they are ‘real’ social actors, and whether their actions and effects can ultimately be traced without remainder to the actions of living human beings in the here and now or, contrarily, whether there is some irreducible aspect of their existence or operation that can only be attributed to the organization itself. Courts and legal theorists, meanwhile, have struggled with the normative dimension of the problem, the granting of unitary legal personality to business firms and its implications for the rights and powers of individuals and collectives. My purpose here is to address this complex of questions, not comprehensively, but with primary emphasis on the ontological and epistemological issues raised by firms. I will try to say precisely what firms are, how they originate, and how their actions are linked to the intentionality and ∗Email: [email protected] I am grateful to David Campbell, David Gindis, Bill Lazonick, Lee McIntyre, Tom Miceli, Heath Pearson, Philip Pettit and two anonymous referees of this journal for helpful criticism. All remaining errors are my