Contemporary Finance & Economics ›› 2018, Vol. 0 ›› Issue (05): 132-.

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Scale, Profit and Firm Boundary: The Theory of Enterprise Growth under the Economic Equilibrium Paradigm

WANG Ying   

  1. (East China University of Political Science and Law, Shanghai 201620, China)
  • Received:2017-12-11 Published:2021-01-21

Abstract: The traditional mainstream economics has not established a specific theory and model on the issue of the enterprise growth, but from the theory of competition to the theory of uncertainty and to the transaction cost theory, all of them have studied some important factors affecting the growth of enterprises. The theory of competition uses the variable of scale to measure the profit maximization of an enterprise; the theory of uncertainty regards profit as the important aspect of the growth of an enterprise, which can explain how profit comes from uncertainty; the issue of firm boundary studied by the transaction cost theory can explain the boundary of the growth of an enterprise and this boundary depends on the size of the transaction cost. The economic theories choose such variables as scale, profit and transaction cost to explore the issue of enterprise profit maximization, which has a strong theoretical explanatory power, but it is not sufficient enough to explain the growth of an enterprise simply by using these variables as the fundamental motive causes. This is decided by the research paradigm of economic equilibrium. The research paradigm of economic equilibrium focus on the compromise to dilemma conflicts in business behaviors, not the driving mechanism of the growth of an enterprise; this is the basic reason why under the equilibrium paradigm only the production model is built but not the growth model.

Key words: enterprise growth; scale; profit; firm boundary; equilibrium paradigm