firmad

Firmad is a term used in some theoretical discussions of industrial organization to describe a networked form of firm organization in which several independent companies coordinate production, standards, and investment through formal contracts or informal governance arrangements, without merging into a single legal entity. The term is not widely standardized and may be used variably by scholars to model alternative governance structures to vertical integration or pure market transactions.

Structure and governance: A firmad comprises a core coordination mechanism—such as a governance board, joint venture, or shared digital platform—and a set of participating firms that retain their separate ownership. Decisions on production planning, standardization, capacity, and investment are made through defined rules, typically contract-based or platform-enabled, with shared incentives and risk-sharing arrangements.

Characteristics and distinctions: Key features include inter-firm interoperability, durability of ties, and joint investment in common infrastructure or standards. Unlike a cartel, a firmad emphasizes cooperative governance rather than price manipulation; unlike a single conglomerate, it does not centralize ownership. It is distinct from a platform operating a marketplace as the owner by framing governance as distributed among participants.

Applications and implications: In theory, firmads can improve supply chain resilience, facilitate economies of scope, and enable coordinated R&D or capital expenditure. They also raise coordination costs, potential free-riding, and governance challenges.

See also: industrial network, strategic alliance, consortium, cooperative, platform economy.