26 J.L. & Econ. 1 (1983)
The Contractual Nature of the Firm

handle is hein.journals/jlecono26 and id is 13 raw text is: THE CONTRACTUAL NATURE
OF THE FIRM*
STEVEN N. S. CHEUNG
University of Hong Kong
ALMOST half a century has elapsed since R. H. Coase wrote The Na-
ture of the Firm.' The impact of this paper is now increasing.2 At about
twenty years of age and before receiving a bachelor's degree from the
London School of Economics, Coase conceived the thesis of that work
during a traveling scholarship to the United States in 1931-32.3 Consider-
* For their helpful comments I am grateful to Armen A. Alchian, Yoram Barzel, Keith
Leffler, John S. McGee, and Dean Worcester.
Ronald H. Coase, The Nature of the Firm, 4 Economica 386 (1937). The paper, how-
ever, was written several years earlier (see note 3 infra).
2 The Social Sciences Citation Index provides the following information. Breaking down
the period of 1966-80 into three five-year periods, the total citations of Coase's firm paper
for each subperiod are: 1966-70, 17 citations; 1971-75, 47 citations; and 1976-80, 105
citations.
In personal correspondence Coase wrote me his recollections as follows:
About the firm. I spent the year 1931-1932 in the United States where I studied the
problem of vertical and lateral integration in American industry. From pondering on these
problems came my views on the nature of the firm. The basic idea in the article on the
Nature of the Firm was certainly worked out by October, 1932 as a letter which I then
wrote (and which has been preserved) shows. Also I completed a draft of the article by the
Spring of 1934 while still in Dundee. As to why I waited until 1937 to publish, the reasons
are various. I did not feel under any great pressure to publish it. I did in fact publish some
other pieces before the firm article but the ideas in these papers were in fact developed
after those on the firm. Remember that I was a young lecturer having to learn a lot in order
to teach courses on subjects on which I knew very little and this took up a good deal of
time. And I was interested in many other aspects of economics. I have never been one to
rush into print-indeed I find it difficult to express exactly what I have in mind and have
never thought that the world would suffer much if it didn't have the opportunity to read
my views. I did in fact make some changes in the period between 1934 and 1937 but there
was no change in my main position. But I did not feel any need to publish before I had
expressed my thoughts as well as I could. Some of the projects on which I worked in the
1930s have still not been completed although I hope one day to do so.
About dates. As I completed the first year of University work while still at high school
(not unusual at that time), I completed my University work and passed the degree exami-
nations in 1931 (after 2 years at LSE). I was awarded a travelling scholarship by the
University of London in 1931 and spent the next year in the United States. At that time, 3
years residence was required for the award of a degree but the regulations were loosely
interpreted so as to allow my year in the United States to be counted as a year of residence
[Journal of Law & Economics, vol. XXVI (April 1983)]
 1983 by The University of Chicago. All rights reserved. 0022-2186/83/2601-0007$01.50
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