Is there a theory of the firm for non-financial reporting? The case of Integrated Reporting

Why do a firm exists and with which objectives are questions that have accompanied the conceptual and
practical developments of the theory of the firm in similar albeit different disciplines, such as economics,
business economics and finance. Foss (1993) distinguishes between theories of the firm rooted in the
economics tradition and those linked to the business tradition. The economics-based theories of the firm
originated to contrast the neoclassical view which conceives the firm as a production function, that is they aim
to find a rationale for the existence of the firm. In this respect, starting form Coase (1937) contribution, the firm
is seen as the result of the market failure. All economics-based theories are about transactions and their costs,
and rely on the rejection of (some) fanciful assumptions about perfect and complete markets lying at the heart
of neoclassical theory. Competence-based theories have a very different DNA as compared to economicsbased
ones: they originated from the attempt to explain the different performances achieved by firms operating
in the same industry, that is to answer the question ‘why companies operating in the same industry differ in
their performance?’. In the group of competence-based theories it is possible to distinguish two main
approaches. The first is the Resource-Based View (RBV) of the firm, as elaborated in the pioneering works of
Wernerfelt (1984) and Barney (1986). The second is the Dynamic-Capabilities Theory (DCT) of the firm, often
also referred to as Evolutionary Theory of the firm (Nelson and Winter, 1982; Teece, 1987 and 2007; Teece,
Pisano, and Shuen, 1990 and 1997). Since these conceptualisations have been put forth, the reference to a
theory of the firm has become essential for those interested also in financial reporting. In fact, a theory of the
firm deals with fundamental aspects, such as the what is the nature of the firm (and its boundaries, in the
economics tradition) and what are the firm’s main goal and primary stakeholder(s) to which the activity is
referred to. The same three issues are also at the core of any reporting system. Reporting is indeed concerned
with the nature and the boundaries of the reported object (e.g. the firm or entity) (Girella, 2018), as well as with
the achieved goal of the firm for specific stakeholders (for example, earning and value creation for shareholders
and other investors, or value added for communities and employees). Despite the significance of such a topic
to understand and appreciate the role and objective of accounting and reporting, few studies have extended
such investigation to the emergent forms of reporting practices, such as sustainability, intangibles and
integrated reporting. Marzo (2014) represents an exception, which has started to problematise how the
reference to a theory of the firm can assist the investigation of Intellectual Capital and of its reporting practices
in a consistent way. Nonetheless this initial effort, a peripheral number of works have followed this path. This
paper aims to fill this void. Starting from the analysis of a representative type of non-financial reporting, namely
Integrated Reporting and its framework, it carries out two levels of investigation. First, it explores the theory of
the firm which the International Integrated Reporting Council (IIRC) has referred to in developing the above
mentioned document. Second, by relying on the results of the first level of analysis, the paper will also assess
the internal (in)consistencies of the fundamental pillars at the core of the analysed types of reporting. Moving
from this examination, the contribution that this work intends to provide to the literature and practice is twofold.
This study is, in the a