Shirking and Sharking: A Legal Theory of the Firm

Abstract

This Article reexamines economic theories of the firm from a legal perspective. These theories are said to have "dominated" and produced a "revolution" in legal scholarship in recent years, particularly in the field of enterprise organization. In this Article, I accept the insights of this scholarship, but recommend a significant expansion of its theoretical premises. In contrast to most economic accounts, I argue that legal theory is needed for an accurate description of the business firm. In particular, I contest economic theories of the firm that fail to appreciate the importance of legal relationships of agency authority, power, and hierarchy.