Balázs Kállay

University of West Hungary Faculty of Economics

Sopron, Hungary

CONTRACT THEORY OF THE FIRM

E-mail: kallay@ktk.nyme.hu

ABSTRACT. In the present article I examine the largest and most elaborated group of theories of the firm, namely the contract theory of the firm, systemizing and comparing the main ascertainments of each theory. Introducing the development process from the neoclassical theories of economics to the contract theory of the firm, I highlighted the conception of Knight and Coase is made the theories attain its nowadays known form. By analysing classical and modern authors in details my piece of work gives answers to the three big questions of the theory of the firm – what is the cause of the existence of the firms, what determines the boundaries of the firm and what determines the internal structure of the firm according to these theories?

Received: December, 2011

1st Revision: March, 2012

Accepted: April, 2012

JEL Classification:  D21, D23, D86,

Keywords: theory, firm, contract, transaction costs, market, hierarchy.