Organizations as Producers of Operating Product Flows to Members of Society

What is it about?

The mainstream economic view about organizations is disputed in this study. This mainstream view is amply promoted in standard textbooks. It claims that organizations exist to increase their owners/shareholders value (wealth), and organizations’ operating activities could be dissociated from financial and investing activities (separability assumption). However, an alternative theory, namely, the intangible flow theory, proposes a different view, which suggests that (i) the major aim of organizations is to deliver flows of operating products to members of society. These operating product flows are vital for human survival and existence. Thus, (ii) operating, investing, and financing decisions are not randomly associated. The two perspectives were compared on firms from 10 different countries (Australia, Canada, China, Germany, Japan, Malaysia, Singapore, South Korea, United Kingdom, and United States) at the beginning of the 21st century (2000–2011). The findings suggest that organizations’ operating, investing and financial decisions seem to be actually connected, as proposed by the intangible flow theory.

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