Abstract: | This paper argues that the mainstream approaches to the theory of the firm do not provide a theory of the human capital‐based or knowledge firm. We examine the neoclassical theory of the firm, the transaction cost model, the incentive‐system approach and the Grossman Hart Moore approach and argue that none of them is able to fully capture the changes to the firm that the movement towards a knowledge economy entails. We also consider the effects of knowledge on the organisation of production. Will production take place within a single large factory, or several smaller factories or even within households? |