In search of new foundations

In this paper I argue that corporate finance theory, empirical research, pr actical applications, and policy recommendations are deeply rooted in an un derlying theory of the firm. I also argue that although the existing theori es have delivered very important and useful insights, they seem to be quite ineffective in helping us cope with the new type of firms that is emerging . I outline the characteristics that a new theory of the firm should satisf y and how such a theory could change the way we do corporate finance, both theoretically and empirically.