Firm

From Hobson's Choice

A firm is an institution for the administration of an economic or productive process. The nature of the firm is conditioned by the prevailing system of economic management and the characteristics of that system's business management. Other determining factors are social relations of production, the transparency of markets, and technology.

The word "firm" is frequently used as a synonym for "business" or "company."

Types of Firms

Firms usually are classified by their legal status: in common law systems such as those of the USA and the Commonwealth, the main ones are the corporation, cooperative, partnership, or single proprietorship; in the UK, the term "corporation" has traditionally been used to refer to government entities, such as the Corporation of London.

In civil law systems such as Continental Europe and Japan, the refinements of business organization are subtly different. Japanese business entities include the same forms as those in the USA or the UK, but the authorities tend to treat them somewhat differently so that corporation (kabushiki kaisha) not only dominates the Japanese economy in terms of value added to the overall economy, but also in terms of the absolute numbers of firms.^[1] German commercial codes included both the familiar Aktiengesellschaft (AG), or business corporation, and Gesellschaft mit beschränkter Haftung (GmBH); this other form has become available to US, UK, and Japanese (inter alia) business enterprises as the limited liability company.^[2] There are strong reasons for firm types to become internationally standardized, albeit slowly; but because of different customs and habits in the civil services of the world, not to mention peculiarities in local industrial systems, these types of firms enjoy very different standing in different countries.

In addition to the various types of legally recognized business enterprises, there remain three entities that are sometimes recognized as firms. These include Stiftungen (German, "foundations"),^[3] wirtschaftliche Vereine (business associations),^[4] and business groups.

Notes

1. ↑ Christine Genzberger, Japan Business: The Portable Encyclopedia for Doing Business With Japan World Trade Press (1994), p.189
2. ↑ "LLC History", LLC Reporter. According to the article, the German GmBH format was allowed in 1892; Continental and Latin American countries followed. The LLC seems to be especially popular in France.
3. ↑ For the history of which, see John Chipman Gray & Roland Gray, The Nature and Sources of the Law, Macmillan (1921), p.59ff
4. ↑ Marco Becht & Ekkehart Boehmer, "Transparency of Ownership and Control in Germany" , European Corporate Governance Institute (ECGI-1999). Becht & Boehmer translate Verein (the singular) as "union," but elsewhere refer to Versicherungsverein auf Gegenseitigkeit as "mutual companies." See also Gunnar Pietsch, "Piercing the Veil of Associations," German American Law Council (2006)

External Links

• Alfred D. Chandler & Takashi Hikino Scale and Scope, Harvard University Press (1990)
• John Chipman Gray & Roland Gray, The Nature and Sources of the Law (complete text online), Macmillan (1921)
• Klaus Gugler, Corporate Governance and Economic Performance, Oxford University Press (2001)
• William Lazonick, Business Organization and the Myth of the Market Economy Cambridge University Press (1991)
• Konrad Zweigert & U. Drobnig, International Encyclopedia of Comparative Law, Martinus Nijhoff Publishers (1981)