MANAGERIAL THEORIES OF THE FIRM

MANAGERIAL THEORIES OF THE FIRM

Managerial theories of the firm place emphasis on various incentive mechanisms in explaining the behaviour of managers and the implications of this conduct for their companies and the wider economy.

According to traditional theories, the firm is controlled by its owners and thus wishes to maximise short run profits. The more contemporary managerial theories of the firm examine the possibility that the firm is controlled not by its owners, but by its managers, and therefore does not aim to maximise profits. Although profit plays an important role in these theories as well, it is no longer seen as the sole or dominating goal of the firm. The other possible aims might be sales revenue maximisation or growth.

Economics Theories

MANAGERIAL THEORIES OF THE FIRM

• Baumol's Theory of Sales Revenue Maximisation

• Marris Growth Maximization Model:

• Williamson’s Managerial Discretionary Theory