The Network Firm as a Single Real Entity: Beyond the Aggregate of Distinct Legal Entities

Abstract

This conceptual paper starts with a question regarding the nature of the firm: is the firm a nexus of contracts or a real entity? To answer this question, the article departs from a critique of firm contract theory that usually focuses on moral personification to propose some theoretical foundations of the firm as a real entity. This provides crucial insights for the analysis of modern complex organizations. Then, this paper applies the real entity paradigm to the case of the network firm: is the network firm merely a collection of distinct legal entities or a single real entity? The integrating and unifying role of intra-network power relationships is emphasized, and some legal and economic aspects of the network firm are discussed to clarify the argument that the network firm is a singular real entity composed from distinct legal entities. Considering the network firm as a single real entity has strong policy implications in terms of employment protection rights and politico-legal responsibilities.

Keywords:

• law and economics
• network firm
• power
• real entity
• theories of the firm