Every piece of strategy research rests on assumptions about what exists. We rarely say them out loud. We assume we know what kinds of things are real (firms, resources, industries, decisions), what a cause looks like, and whether the things we study hold still long enough to theorise about. These assumptions are not just philosophical background. They decide what counts as a good research question, what a satisfactory explanation looks like, and where we draw the line between what is strategic and what is merely context. I want to use this space to bring those assumptions into the open and look at what follows from them. The best place to start is the assumption we examine least: that we already know what a firm is.
The disappearing firm
Let me start with a simple thought experiment. Take a corporation and remove its parts one at a time. Close its factories. Sell its machinery. Shut its showrooms. Let every employee go. Knock down the building it works in. Now ask a plain question: does the corporation still exist?
It does. It can still borrow money, sign contracts, hire new people, and buy new premises. None of the physical things we took away were the corporation. They were only what it happened to own at one moment. The entity survived losing all of it.
So when does a corporation actually die? Not when it loses its assets or its staff. A corporation dies when a court orders its dissolution. Its existence depends on legal recognition, not on any physical object.
There is a small irony in the word itself. “Corporation” comes from the Latin corpus, which means body. A body is the one thing a corporation does not have. The name points to the property it most clearly lacks.
So what kind of thing is a firm?
If the firm is not its buildings, its machines, or even its people, we need an answer to a basic question: what is it? The clearest answer is that a firm is a fiction. More precisely, it is a legal fiction that exists because people and institutions treat it as real.
I want to be careful here, because the word “fiction” can sound dismissive. It is not meant that way. Fictions of this kind are some of the most powerful things in social life. They are real in their effects, and they have those effects because enough people act as if they are real. This is the same basic mechanism that lets shared stories coordinate large groups of strangers (Harari, 2011). It is what allows a corporation to outlive its founders, its products, and its original purpose.
This is where the question stops being abstract. Most strategy research treats the firm as a natural economic unit: a thing with a boundary, a stock of resources, and a position, which managers try to optimise. But if the firm is really an instituted fiction rather than a natural object, then treating it as an object is not a harmless shortcut. It hides the work that actually keeps the firm in existence, which is the ongoing job of producing and holding collective belief.
The fiction is political
Once we see the firm as something we institute rather than something we find, a new question appears: who institutes it, and in whose interest? Recent organisation theory has pushed hard on exactly this. Meyer, Leixnering, and Veldman (2022) treat the corporation as a form that is historically specific and politically loaded, not as the natural end point of economic progress. In that volume, Veldman argues that the modern corporation is best understood as a political actor.
If that is right, it changes how we should think about corporate governance. Governance would look less like contract law, where two private parties bargain over terms, and more like constitutional law, where power is checked and balanced and held accountable to many constituencies.
The history fits this reading. Legal personhood for corporations in the United States goes back to Trustees of Dartmouth College v. Woodward (1819), and people argued for the rest of the nineteenth century about why a corporation should count as a person at all. By the time of Citizens United v. FEC (2010), courts were granting corporations rights that no one in 1819 imagined they would need. Seen this way, shareholder primacy is not the firm’s natural state. It is one position in a long argument about what the fiction is for.
Managing what does not exist yet
Now I want to show why this way of seeing the firm earns its keep. If a firm is a fiction held in place by collective belief, then the deepest strategic act is not optimising resources that already exist. It is generating and stabilising things that do not exist yet: future markets, new products, and new identities for the firm.
It helps to compare this with theories we already have. Decision theory assumes the options are already laid out in front of us. Bounded rationality explains how firms choose among options they already know. Sensemaking, in Weick’s (1995) account, explains how firms look back and build meaning out of what has already happened. Notice what none of these explain: how a firm comes up with the possibilities in the first place, the ones that are not yet on the table.
I think this is the missing piece in our theories of the firm. Call it imagination: the capacity to build a picture of something that is not yet real. Imagination comes before search, before strategy, and before adaptation, because you cannot search for, choose, or adapt toward an option you have not first imagined. Scholars have begun to map this ground. Rindova and Martins (2021) treat imagination as a strategic resource, and Beckert (2016) shows how “fictional expectations” about the future drive real investment today. I read both as describing, from the other side, the same thing the legal-fiction view points to. The corporation is held together by collective imagination, and strategy is the disciplined work of extending and protecting that imagined entity over time. Its most dangerous failure is not inefficiency. It is imaginative collapse, where the set of futures a firm can picture narrows until it can no longer imagine a version of itself that survives.
What this ontology lets us ask
I began by saying that our assumptions about what exists decide which questions we can ask. That is the real payoff here, so let me make it concrete by putting the two views side by side.
If the firm is an object, the natural questions are about its boundaries, its resources, and how well it fits its environment. If the firm is a sustained fiction, the natural questions are different: how collective belief gets produced and held, how imagined futures are created and lost, and what happens to an organisation when the story that held it together stops being believed.
Both sets of questions are worth asking. But only the second one keeps in view the work that actually keeps a firm alive. We have spent a long time studying the firm as a thing. I think it is worth studying it as something held in existence by an act of collective imagination, and asking what strategy looks like once we admit that this is what we have been managing all along.
References
Anderson, B. (1983). Imagined communities: Reflections on the origin and spread of nationalism. Verso.
Beckert, J. (2016). Imagined futures: Fictional expectations and capitalist dynamics. Harvard University Press.
Harari, Y. N. (2011). Sapiens: A brief history of humankind. Harper.
Meyer, R. E., Leixnering, S., & Veldman, J. (Eds.). (2022). The corporation: Rethinking the iconic form of business organisation. Research in the Sociology of Organizations, Emerald.
Rindova, V. P., & Martins, L. L. (2021). Shaping possibilities: A design-science approach to developing novel strategies. Academy of Management Review, 46(4), 800-822.
Weick, K. E. (1995). Sensemaking in organizations. Sage.