An Aspirational Community Theory of the Firm

Xin Li

    Research output: Working paperResearch

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    All of the three major theories of the firm, i.e., the transaction cost theory, knowledge-based theory and the entrepreneurship theory, offer some insightful analyses of the nature of the firm. However, they all have limitations and weaknesses in answering the fundamental question of the existence of the firm. In addition, they are all partial due to their particular focus on the multifaceted phenomenon of the firm. We argue that it is necessary and sufficient to develop a comprehensive yet integrative theory of the firm that combines the three competing yet complementary logics. Toward this end, we propose an aspirational community theory of the firm (ACT) as a candidate theory by conceptualizing the firm as an aspirational community, the core of which is a group of like-minded people sharing similar or same aspiration/vision. To explain the existence of the firm, we make a distinction between contractual labor and aspirational labor, the former being defined as services provided by a laborer in fulfillment of a contract while the latter as services provided by a laborer in pursuit of an aspiration; and argue that firms exist because while the market may be effective and efficient for allocating contractual labor it is less effective and efficient than the firms for allocating aspirational labor.
    Original languageEnglish
    PublisherDepartment of International Economics and Management, Copenhagen Business School
    Number of pages30
    Publication statusPublished - 2011


    • Theory of the Firm
    • Transaction Cost
    • Knowledge
    • Entrepreneur
    • Aspirational Community

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