On Evolution of Firm Theory and its Most Up-to-date Frontier

By reviewing the evolution of the firm theory, this article focuses on the knowledge based theory of the firm that has emerged in recent years. The theory views the firm as an agency that integrates its employee's special knowledge. From a brand new perspective, it explains the issues including the existence and the boundary of the firm, the coordination in the firm, and the relation between the structure, decision making power and the knowledge.