Can Contractual Theories of the Firm Explain the Existence of Knowledge-intensive Firms

This paper argues that the existence of knowledge-intensive firms pose puzzelments for the contractual theories of the firm. For example, in knowledge-intensive firms physical assets are widely absent, the nature of employment relations and asset-ownership are much less clear compared to industrial firms. Although knowledge-intensive firms account for a growing share in wealth-creation and employment, they have hitherto made relatively little impact on contributions to the contractual theories of the firm (e.g. the work associated with Coase, 1937; Williamson,1971 1975, 1985; Alchian and Demsetz, 1972; Meckling and Jensen,1976, Grossman and Hart, 1986, Hart, 1995). Here, I identify puzzlement for the contractual theories of the firm related to the existence of knowledge-intensive firms.