Chapter 21: The Future of the Business Firm

The demonstrated ability of the business corporation to gradually adapt to shifting political, social, and economic forces is the key to its continuiing strength and resilience. The corporation is likely to continue to be the dominant way of organizing economic activity in the developed wourld through the twenty-first century
Responding to a variety of new influences, the business corporation has gone through three stages of development: from the simple, competitve classical model of the nineteenth century to the managerial model of the first half of the twentieth century to the social environment model characteristic of the second halp of the twentieth century. The United States is in the midst of several important transitions that affect business-government relations in powerful ways.
In reality, of course, corporations-especially the larger and publicly owned ones-have always departed substantially from the narrow confines of the profitmaximizing model of classical economics
Three models of business organization:

• The classical market model, in large measure the original concept of business organization, was based primarily on the British economy of the nineteenth century.
• The managerial model was the next major development in terms of the fundamental approach to the organization and functioning of the business firm. Its basic identifying characteristic is the acknowledgment of the effective separation of ownershiop form management.
• The social environment model is the most recent of the three approaches to business behavior.

The latter tend to emphasize growth in size, market share, and profitability, as well as the security of their position in the community and in society generally. The broader social purpose of the corporation is een as creating wealth, society may have a moral as well as economic interest in business taking account of all the firm-specific investments.
In the broad sweep of American history, the transcendent ideological debate has been between the jeffersonian and Hamiltonian approaches to democracy: centralizing or decentralizing the location of power in society
In Western Europe, numerous barriers to the adoption of a more efficient operation of industrial facilities have been cited repeatedly as a key reason for the dlower growth of employment and economic activity than have occurred in the United States in recent decades.
A new policy climate for business may be takinig shape in the early twenty first century. It is an external environment less hospitable than that existing during the administration of Ronald Reagan.
Potential areas for deeper goverment involvement are numerous:

• The rising concern over the threats from international terrorist groups and the difficulty of reconciling sprcific responses with traditional notions of freedom and privacy.
• Renewed emphasis on environmental protection and fairness in the treatment of employess.
• Reducing the sale of illegal drugs and dealing with the adverse impacts of widespread use of various "chemical substances".
• Better education of the workforce so that American business can compete more effctively in an increasingly global market.

Source: Business and government in the Global Marketplace (7 edition Murry L. Weidenbaum)