In the current series of posts regarding corporations, I have asked the question do we need corporations? In exploring this question, I then looked why the need for corporations arose in the first place. Related to this is the question of what advantages and disadvantages accrue from having corporations.
Consider two things. Most products and services today require a complex interplay of multiple factors. Corporations are also essentially large groupings of people come together for a common purpose. So in order to bring a product or service to market various tasks need to be performed. In the past, the cost of doing those tasks internally was lower than having them done from the outside. This was a major advantage to forming a corporation. However, while the costs are lower, nevertheless they are present. Also, accounting systems do not capture all the costs of internal transactions. Often, the costs that are not quantized are inherently difficult (and in the past were almost certainly impossible) to do so. So corporations incur costs when going about their business. Some of those costs are quantified by accounting systems. Others are at best estimated and still others are ignored altogether.
Globalization has greatly increased the complexity of doing business. Advances in transportation and communication technologies and a concomitant reduction in the cost of the same has resulted in long, complex supply chains that are nevertheless able to supply technically advanced products at ever reducing real costs. Corporations have taken full advantage of these trends. However these same trends have also lessened the traditional advantages of corporations. If a particular product can be manufactured overseas, what prevents it from being designed overseas as well? The question then becomes can we do away with corporations altogether?
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