The purpose of this dissertation is to challenge the predominant theories of the firm in economics by demonstrating that the firm can only be properly understood if the importance of cooperation based on trust and loyalty, and the ability of the firm to achieve that cooperation by influencing the social foundations of behaviour, is appreciated. Chapter 1 demonstrates that neglecting this ‘social nature’ of the firm renders the predominant theories incomplete and incompatible, with contract-based theories clinging to a rigid model of behaviour and competence-based theories failing to develop the social foundations of knowledge. The second chapter constructs a theory of the firm that rectifies these shortcomings by maintaining that the firm fulfils its purpose of developing and applying productive knowledge by achieving cooperation, which, along with the dual function of achieving coordination, involves a combination of organisational structures and organisational culture. In Chapter 3, this theory reveals that, contrary to deterministic views on organisation and economic development, a range of organisational forms are possible for any given technology or culture, and that organisation in fact shapes technology and culture. In Chapter 4, the dissertation shows that, contrary to the predominant theories of the firm, cooperative firms may have an inherent advantage in achieving cooperation based on trust and loyalty, and in maintaining that cooperation while also achieving the coordination required for advanced technologies. Although this ability may be suppressed by the prevailing institutional environment, the case of Mondragón, discussed in Chapter 5, demonstrates that it can be activated by innovations such as cooperative groups and ‘second-tier coops’. Although Mondragón’s success has been attributed to the uniquely cooperative traits of Basque culture (as opposed to its structural innovations), Chapter 6 demonstrates through primary and secondary research that Mondragón has in fact been used as model across the globe.

Studies of the value relevance of accounting number in capital market research are consistent with the simple view that, in equilibrium, book values are equal to or have some long-term relationship with market values, and that market returns are related to book returns. This dissertation examines the value relevance of annually-reported book values of net assets, earnings and dividends to the year-end market values of five Japanese firms between 1950 and 2004 (a period of 54 years). Econometric techniques are used to develop dynamic models of the relationship between markets, book values and a number of macro-economic variables. In constructing the models, the focus is to provide an accurate statistical description of the underlying relationships between market and book value. It is expected that such research will add to the body of knowledge on factors that are influential to Japanese stock prices. The significant findings of the study are as follows: 1) well-specified models of the data generating process for market value based on the information set used to derive the models are log-linear in form. Additive, linear models in untransformed variables are not well-specified and forecast badly out of sample; 2) the book value of net assets has relevance for market value in the five Japanese firms examined, in the long run.