| Abstract: | This paper undertakes the development of a foundation for a theory of why firms plan. The theory of the firm literature provides a useful starting-point and provides insight into the factors which have an effect on the planning function of the firm. Those factors include transactions costs, uncertainty and asset-specificity. The fact that some firms should not plan even in the face of uncertainty and transactions costs emphasizes the importance of the relative magnitudes of various costs and demonstrates the relevance of standard economic analysis for the study and practice of business planning. Examples illustrate the role of planning for human, financial and physical resources. |
