In economics,industrial organization is a field that builds on the theory of thefirm by examining the structure of (and, therefore, the boundaries between) firms andmarkets. Industrial organization adds real-world complications to the perfectly competitive model, complications such astransaction costs.
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The rise of the modern corporation has brought a concentration of economic power which can compete on equal terms with the modern state - economic power versus political power, each strong in its own field. The state seeks in some aspects to regulate the corporation, while the corporation, steadily becoming more powerful, makes every effort to avoid such regulation... The future may see the economic organism, now typified by the corporation, not only on an equal plane with the state, but possibly even superseding it as the dominant form of social organization. The law of corporations, accordingly, might well be considered as a potential constitutional law for the new economic state, while business practice is increasingly assuming the aspect of economic statesmanship.
In recent years economists and historians have increasingly turned their attention to modern economic institutions. Economists such asEdward S. Mason, A. D. H. Kaplan,John Kenneth Galbraith,Oliver E. Williamson,William J. Baumol, Robin L. Marris,Edith T. Penrose,Robert T. Averitt, and R. Joseph Monsen, following the pioneering work ofAdolph A. Berle, Jr., andGardiner C. Means, have studied the operations and actions of modern business enterprise. They have not attempted, however, to examine its historical development, nor has their work yet had a major impact on economic theory. The firm remains essentially a unit of production, and thetheory of the firm a theory of production.
In the late 1930s,E.S. Mason wrote a series of papers which established the research programme which became industrial organisation. Many of these papers discussed the lessons for antitrust policy from the Robinson/ Chamberlin revolution. Although these papers made some proposals for a strengthening of antimonopoly measures, it is clear that there is a decisive break between the emerging Harvard school the old J.B. Clark/ Marshallian preoccupation with freedom and openness of competition, which Mason refers to as "antiquated and inadequate."
John Cunningham Wood (eds.)Alfred Marshall: Critical Assessments. Second series. ... p. 296
