The Political Nature of the Firm

Abstract

Political economy assumes firms adapt to institutional environments. This paper asks when firms produce them. At regional scale, institutional environments are not always settled—new industries lack governing arrangements, declining communities face collapsed order, abandoned places have lost the coordination that once sustained them. In these vacuums, firms are not takers because there is nothing yet to take. Under conditions of vacuum, capability, and agency, firms extend their coordinating capacity beyond their boundaries to produce institutional order directly. I call this corporate statecraft. The concept is Coasean: firms that coordinate internally by suppressing the price mechanism can coordinate externally by building the infrastructure, standards, and relationships that constitute economic life in a place. Four cases illustrate: Terman's Stanford, Miller's Cummins, the Allegheny Conference's Pittsburgh, Long's American Woolen. They vary in vacuum type, agent form, and orientation—open statecraft that empowers broad participation versus closed statecraft that entrenches incumbents. The cases suggest orientation shapes outcome, though the conjecture requires further investigation. The paper names a phenomenon visible across literatures but not yet integrated: firms as producers, not only products, of institutional order.