Mangerial theories of the firm are economic theories of how the behaviour of modern management affects the working of the economic system. These theories have been the subject of considerable research in business and management literature. Managerial theories of the firm themselves fall into three broad categories: discretionary theories, in which it is assumed that managers, without direct stake in the firm and free from strict supervision by the owners, will take decisions based mainly on price and cost; growth-oriented theories, which start from the same basis but assume the long-term goal of managers is the growth of the enterprise; and bureaucratic theories, which assume that the owners of the firm also control it and seek strategies which reduce risk. These managerial theories stand in opposition to neo-classical theories of the firm, which imply that management-managed firms are directed in the sole interests of their shareholders.

R. L. Marris