economic theory of the firm
- economic theory of the firm
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the theory that states that the only duty that a company has to those external to it is financial. The economic theory of the firm holds that shareholders should be the prime beneficiaries of an organization’s activities. The theory is associated with top-down leadership, and cost-cutting through rationalization and downsizing. With immediate share price dominating management activities, economic theory has been criticized as being too short-term, as opposed to the longer-term thinking behind stakeholder theory.
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