The New Economic Theory of the Firm: Critical Perspectives from History

Theories of the inform and undergird corporate law,' but they only intermittently appear as principal points in corporate law discourse. They stayed in the background during the half century ending in 1980, while a conception of the as a management power structure prevailed unchallenged in legal theory.2 The situation changed around 1980, when a theory of the firm3 appeared, imported from economics. This new economic theory of the firm asserted a contractual conception. The firm, said its leading text, is a legal fiction that serves as a nexus for a set of contractual relationships among individual factors of production.4 According to the theory, corporate relationships and structures could be explained in terms of contracting parties and transaction costs. Law and economics writers restated corporate law in the theory's terms5 and successfully reoriented legal discourse on corporations.6 The theory already has sunk into the