Tasubinsa is a "Special Employment and Occupational Center" constituted in accordance with Spanish Law where 90% of the workers have mental, sensorial or physical impairments of at least 30%. Its positive experience of more than 15 years provides entirely different responses from mainstream neoclassical theory (transaction cost theory, agency theory, and shareholder theory) to basic questions such as "What is a firm?", "What is its purpose?", "Who owns a firm?", and "What do (...) a firm's owners seek?". The article discusses how these different premises give rise to a distinctive corporate culture centered on the handicapped person. (shrink)

As the transaction cost theory of the firm was taking shape in the 1970s, another important movement in economics was emerging: a revival of the ‘Austrian’ tradition in economic theory associated with such economists as Ludwig von Mises and F. A. Hayek . As Oliver Williamson has pointed out, Austrian economics is among the diverse sources for transaction cost economics. In particular, Williamson frequently cites Hayek , particularly Hayek’s emphasis on adaptation as a (...) key problem of economic organisation . Following Williamson’s lead, a reference to Hayek’s ‘The Use of Knowledge in Society’ has become almost mandatory in discussions of economic organisation . However, there are many other potential links between Austrian and transaction cost economics that have not been explored closely and exploited.This article argues that characteristically Austrian ideas about property, entrepreneurship, economic calculation, tacit knowledge, and the temporal structure of capital have important implications for theories of economic organisation, transaction cost economics in particular. Austrian economists have not, however, devoted substantial attention to the theory of the firm, preferring to focus on business-cycle theory, welfare economics, political economy, comparative economic systems, and other areas. Until recently the theory of the firm was an almost completely neglected area in Austrian economics, but over the last decade, a small Austrian literature on the firm has emerged. While these works cover a wide variety of theoretical and applied topics, their authors share the view that Austrian insights have something to offer students of firm organisation. (shrink)

The theory of the firm initially developed by Ronald Coase has made explicit the political nature of firms by putting hierarchy at the heart of the economic process. Theories of workplace democracy articulate this intuition in the normative terms of the conditions under which this political power can be legitimate. This paper presents an organizational theory of workplace democracy, and contends that the democratization of firms requires that we take their organizational dimension explicitly into account. It thus (...) construes democracy as an organizational principle and juxtaposes it to market, hierarchy, and norm-compliance as rival principles for the organization of economic activities. Attempts to construe democracy as an organizational principle with unique features in the tradition of transaction-cost economics are discussed before proposing an innovative solution based on an updated version of grid/group cultural theory of politics, adjusted to accommodate the basic requirements of democratic theory. (shrink)

This book examines transaction cost economics, the influential theoretical perspective on organizations and industry that was the subject of Oliver Williamson's seminal book,Markets and Hierarchies. Written by leading economists, sociologists, and political scientists, the essays collected here reflect the fruitful intellectual exchange that is occurring across the major social science disciplines. They examine transaction cost economics' general conceptual orientation, its specific theoretical propositions, its applications to policy, and its use in systematic empirical research. The chapters include (...) classic texts, broad review essays, reflective commentaries, and several new contributions to a wide range of topics, including organizations, regulations and law, institutions, strategic management, game theory, entrepreneurship, innovation, finance, and technical information. The book begins with an overview of theory and research on transaction cost economics, highlighting the specific accomplishments of scholars working within the perspective and emphasizing the enormous influence that transaction cost reasoning exerts on the social sciences. The following section covers conceptual uses for the transaction cost framework and major theoretical or methodological elements within it, such as bounded rationality. While advancing some interesting theoretical propositions, these chapters are in fact more ambitious: each examines a specific field, area, or research program and attempts to fashion a new way of thinking about research questions. In the section on industrial applications, contributors study the application of transaction cost theory to a range of problems in utilities, telecommunications, laser printing, and early international trade. The book closes with four microanalytical chapters that delve into the structures and behaviors of specific aspects of firms and organizations: boards of directors, equity structures, employment models, human resource policies and practices, technology strategies, and innovation events. Firms, Markets, and Hierarchies collects excellent social science work on transaction cost economics, taking stock of its status, charting its future development, and fostering its renewal and evolution. (shrink)

The place of money capital in the theory of the firm has remained a relatively neglected question in traditions of economic analysis. In this highly integrative work, issues in production, pricing, capital investment and financial theory are brought to new levels of interdependence. Developing a three-part argument, Money Capital in the Theory of the Firm deals successively with the theoretical issues and analytic motivation, the neoclassical tradition and postclassical perspectives. In doing so, it presents a (...) self-contained foundation in the basic structures of microeconomic analysis relating to optimize decision making in the firm and in the accounting concepts and statistical apparatus of probability theory relevant to the neoclassical aspects of the argument. Additionally, the book provides the essential mathematical development of such advanced topics as utility functions defined over stochastic arguments, the equilibrium theory of financial asset prices and yields, the cost of money capital, and investment decision criteria. This book makes an important contribution to the formation of new and analytically richer perspectives in the important area of economics it addresses. It will be of particular interest to those working in economic theory and microeconomics, and their advanced students. (shrink)

The paper argues that Israel Kirzner’s theory of entrepreneurship has been influential on a number of related “dynamic” theories of organization. Kirzner’s theory is animated by a dual concern – the process of rentseeking behavior and the fundamental incompletness of knowledge. Placed in a technological and institutional context, this theory points to the importance of dynamic transaction costs: the coordination costs of acting upon an innovative rent-seeking opportunity. In some contexts, this kind of cost can (...) explain vertical integration; in other contexts, it can explain the reverse phenomenon: vertical disintegration.Cet article soutient que la théorie de l’entrepreneur d’Israel Kirzner a influencé un grand nombre de théories dynamiques de l’organisation. La théorie kirznerienne est animée par un objectif double : – le processus de comportement de recherche de rente et l’incomplétude fondamentale de la connaissance. Replacée dans un contexte technologique et institutionnel, cette théorie souligne l’importance des coûts de transaction dynamiques : les coûts de transaction liés à une opportunité dans la recherche de rente innovante. Dans certaines situations, cette catégorie de coûts peut expliquer l’intégration verticale ; dans d’autres, elle peut expliquer le phénomène inverse : la désintégration verticale. (shrink)

Across the management, social science, and business ethics literatures, and in much of the philosophy literature, trust is characterized as a disposition to act given epistemic states—beliefs and/or expectations about others and about the risks involved. This characterization of trust is best thought of as epistemological because epistemic states distinguish trust from other dispositions. The epistemological characterization of trust is the amoral one referred to in the title of this paper, and we argue that this characterization is conceptually inadequate. We (...) outline and defend an alternative conception of trust as a moral phenomenon: when A trusts B to do something, A invites B to acknowledge and accept an obligation; when B accepts the invitation, B takes on an obligation; in that way trust creates an obligation. We conclude with an application, drawing out the difference between the epistemological conception of trust and our own in the context of Ghoshal et al.'s (Sloan Management Review 40:9—20, 1995, Academy of Management Learning & Education 4:75—91, 2005) critique of transaction cost theories of the firm. (shrink)

Abuse of authority is an unsolved problem in the new institutional theory of the firm. This paper attempts a double attack to this problem by developing a contractarian view of corporate codes of ethics. From the ex-ante standpoint the paper elaborates on the idea of a Social Contract based on Co-operative Bargaining Games and deduces from it the fair/efficient 'Constitution' of the firm endorsed by means of a well-devised corporate code of ethics. From the ex-post standpoint, codes (...) of ethics are proved to be self-enforcing norms, by showing how they put at work the mechanism of a Repeated Game of Reputation within hierarchical transactions (firms) characterised by incomplete contracts and unforeseen events. To accomplish this task a theory of rationality in the face of unforeseen contingencies is sketched by working out the idea that the domain of a principle of ethics defines a fuzzy event, i.e. an event to which also the ex-ante unforeseen, unimaginable states of the world belong to a certain degree. (shrink)

Control of the market microstructure theory of corporate governance perspective on the traditional theory of the firm as a deepening of the study, the use of information economics and game theory tools to the mainstream economic analysis framework for the development, the market for corporate control transactions, configuring and tuning the details of the process accurately describes the shares of companies in the separation of ownership and control of internal control case shareholders, tender offers, takeover bids (...) and other governance mechanisms different from the actual control and operation of, the existence of incomplete information and transaction costs under control conditions to analyze market transactions , from the perspective of market microstructure control to clarify the shareholders of the managers to implement effective control mechanisms, policies and conditions. Share control over the behavior of financial market issues, equity market and environmental factors control the interaction between the control and equity issues in the legal protection and market control policy design issues will be the future theoretical research in this field focus. Corporate governance theory based on corporate control market microstructure focuses on trading, allocating and adjusting process of the corporate control market, applying the information economic approach and game instrument to expand the mainstream economic analysis framework. It accurately describes the factual operation of different corporation control and governance mechanism such as corporation owner's internal control, tender offer, takeover bid and negotiating transfer, deepening the traditional firm theory. Moreover it analyzes the corporate control market transactions on the case of incomplete information and positive transaction cost, examines the effective mechanism, strategies and condition by which the owner control and monitor the management based on corporate control market microstructure perspective. Those are the future research topics in this field that behavior finance, interaction with environments and legislation protect and regulation policy designations. (shrink)

New network technologies are framed as eliminating ‘transaction costs’, a notion first developed in economic theory that now drives the design of market systems. However, the actual promise of the elimination of transaction costs seems unfeasible, because of a cyclical pattern in which network technologies that make that promise create processes of institutionalization that create new forms transaction costs. Nonetheless, the promises legitimize the exemption of innovations of network technologies from critical scrutiny.

This article provides an ISCT analysis of commercial bribery focused on transaction cost economics. In the language of Antitrust, commercial bribery is a form of vertical arrangement subject to the same efficiency analysis that has found other vertical arrangements potentially beneficial to consumers. My analysis shows that actions condemned as commerical bribery in the Honda case may well have benefited Honda's dealer network once promotional free riding and other forms of rent seeking by dealers are considered. I propose (...) that the term "commercial bribery" should be avoided until after an ISCT analysis shows that the community is likely to have been harmed. The term "third-party payments" is a more ethically neutral term with which to begin the analysis. (shrink)

We study the effect of transaction costs (e.g., a trading fee or a transaction tax, like the Tobin tax) on the aggregation of private information in financial markets. We analyze a financial market à la Glosten and Milgrom, in which informed and uninformed traders trade in sequence with a market maker. Traders have to pay a cost in order to trade. We show that, eventually, all informed traders decide not to trade, independently of their private information, i.e., (...) an informational cascade occurs. We replicated our financial market in the laboratory. We found that, in the experiment, informational cascades occur when the theory suggests they should. Nevertheless, the ability of the price to aggregate private information is not significantly affected. (JEL C92, D8, G14). (shrink)

Purpose of the study is to determine factors influencing transaction costs on the sharing economy. The article examines the evolution of the fundamental concept of economic theory – transaction costs, under the influence of the expansion of sharing economy. The sharing economy appears to be the result of the further development of the consumption economy, since within the framework of this economic system, the quality of the services provided is improving. The scientific novelty lies in the clarification (...) of the mechanism of mutual development of both the sharing economy and transaction costs. As a result, the importance of the factor of massive use of the Internet and mobile devices by a huge number of people, as influencing the service provision market, was revealed. At the same time, there is no need to overcome various barriers, and entrepreneurs have the opportunity to sell not so much reductions in production costs, but rather a reduction in transaction costs. (shrink)

The Austrian School's conventional theory of the firm is based on an attempt to synthesize Coase's concept of the firm as a centrally planned hierarchy with the Austrian theory of entrepreneurship and monetary calculation. This paper is a critique of that program as well as an attempt to outline the alternative theory of the firm, one based on the synthesis of the contractual agency theory of the firm with the same Austrian arguments (...) about entrepreneurship and calculation. The firm in this paper is defined as a nexus of various markets for goods as well as for labor and managerial services rather than as a hierarchy or “organization.” Both the neoclassical and Austrian critiques of the latter concept are utilized to prove that a clear distinction between the market and the firm cannot be established. That distinction is based on the misunderstanding of the firm's dynamics as exclusively tied to the managing/transaction costs ratio as well as on the mischaracterization of inter-firm relations as commanding ones. On the other hand, the central planning view of the firm is equally at odds with the key Mises's argument that rational economic planning is impossible in the absence of market prices. If this is so, the firm, as understood in a Coasian paradigm, would not have any reason to exist, or any reason to contribute positively to economic efficiency, because it would simply represent a centrally planned “island of incalculability” in a wider market setting. Since the firm is a nexus of various markets, its operation is contrary to the Coaseian assumptions led by the price signals. Only insofar as the internal firm's operation is driven by the price signals can the firm be efficient. (shrink)

Stakeholder scholars have long explored how stakeholder relationships differ from economic transactions. We contribute to this ongoing inquiry by developing a conceptual framework of relationality in stakeholder theory that encompasses a stakeholder-theoretic extension of Williamson's contracting schema and a new typology of stakeholder relationships. Premised on understanding relationality as the need for informal human relationships beyond formal governance, our framework locates the key difference between transaction cost economics and stakeholder theory in their treatment of informal relationships. (...) While transaction cost economics perceives informal relationships to be shaped by formal governance structures and enforced by contractual safeguards, stakeholder theory is open to the possibility that some informal relationships between stakeholders may be genuinely moral and thus irreducible to formal governance and contractual safeguards. These stakeholder relationships may lead to unique economic effects described by instrumental stakeholder theory. The difference that we identified between the two literatures shows how stakeholder theory's embrace of relationality surpasses that of transaction cost economics. (shrink)

This article provides an ISCT analysis of commercial bribery focused on transaction cost economics. In the language of Antitrust, commercial bribery is a form of vertical arrangement subject to the same efficiency analysis that has found other vertical arrangements potentially beneficial to consumers. My analysis shows that actions condemned as commerical bribery in the Honda case (1996) may well have benefited Honda's dealer network once promotional free riding and other forms of rent seeking by dealers are considered. I (...) propose that the term "commercial bribery" should be avoided until after an ISCT analysis shows that the community is likely to have been harmed. The term "third-party payments" is a more ethically neutral term with which to begin the analysis. (shrink)

Migrating Minds contributes to the prominent interdisciplinary domain of Cosmopolitan Studies with twenty innovative essays by humanities scholars from all over the world that re-examine theories and practices of cosmopolitanism from a variety of perspectives.

This book brings together in one place the work of one of our most respected economic theorists, on a field in which he has played a large part in originating: the New Institutional Economics. Transaction cost economics, which studies the governance of contractual relations, is the branch of the New Institutional Economics with which Oliver Williamson is especially associated.Transaction cost economics takes issue with one of the fundamental building blocks in microeconomics: the theory of the (...) firm. Whereas orthodox economics describes the firm in technological terms, as a production function, transaction cost economics describes the firm in organizational terms, as a governance structure. Alternative feasible forms of organization--firms, markets, hybrids, bureaus--are examined comparatively. The analytical action resides in the details of transactions and the mechanisms of governance.Transaction cost economics has had a pervasive influence on current economic thought about how and why institutions function as they do, and it has become a practical framework for research in organizations by representatives of a variety of disciplines. Through a transaction cost analysis, The Mechanisms of Governance shows how and why simple contracts give way to complex contracts and internal organization as the hazards of contracting build up. That complicates the study of economic organization, but a richer and more relevant theory of organization is the result. Many testable implications and lessons for public policy accrue to this framework. Applications of both kinds are numerous and growing.Written by one of the leading economic theorists of our time, The Mechanisms of Governance is sure to be an important work for years to come. It will be of interest to scholars and students of economics, organization, management, and law. (shrink)

This book brings together in one place the work of one of our most respected economic theorists, on a field in which he has played a large part in originating: the New Institutional Economics. Transaction cost economics, which studies the governance of contractual relations, is the branch of the New Institutional Economics with which Oliver Williamson is especially associated.Transaction cost economics takes issue with one of the fundamental building blocks in microeconomics: the theory of the (...) firm. Whereas orthodox economics describes the firm in technological terms, as a production function, transaction cost economics describes the firm in organizational terms, as a governance structure. Alternative feasible forms of organization--firms, markets, hybrids, bureaus--are examined comparatively. The analytical action resides in the details of transactions and the mechanisms of governance.Transaction cost economics has had a pervasive influence on current economic thought about how and why institutions function as they do, and it has become a practical framework for research in organizations by representatives of a variety of disciplines. Through a transaction cost analysis, The Mechanisms of Governance shows how and why simple contracts give way to complex contracts and internal organization as the hazards of contracting build up. That complicates the study of economic organization, but a richer and more relevant theory of organization is the result. Many testable implications and lessons for public policy accrue to this framework. Applications of both kinds are numerous and growing.Written by one of the leading economic theorists of our time, The Mechanisms of Governance is sure to be an important work for years to come. It will be of interest to scholars and students of economics, organization, management, and law. (shrink)

This paper explores the conditions favouring or inhibiting the implementation of strategic corporate social responsibility policies in the context of global value chains. Using transaction cost theory, we specify the economic and behavioural issues raised by strategic CSR policies. We show that the existence of market rewards for such policies does not constitute a solution per se, but tends to increase the difficulties that value chain members face. Bringing TCT into the analysis of the diffusion of strategic (...) CSR policies in GVCs helps us to make different contributions. We first theoretically identify some limiting conditions of strategic CSR policies in GVCs. We also contribute to developing a more robust theoretical perspective for CSR in GVC research, which remains underdeveloped and mostly driven by empirical case studies. Finally, we shed light on new research questions and topics that could guide major theoretical and empirical investigations in the capacity of GVCs members to bypass the numerous difficulties involved in the implementation of strategic CSR policies. (shrink)

The theory of the firm did not exist, in any serious manner, until around 1970. Only then did the current theory of the firm literature begin to emerge, based largely upon the work of Ronald Coase and to a lesser degree Frank Knight. It was work by Armen Alchian, Robert Crawford, Harold Demsetz, Michael Jensen, Benjamin Klein, William Meckling and Oliver Williamson, among others, that drove the upswing in interest in the firm among mainstream economists. (...) This accessible book provides a valuable overview of the prehistory of the firm. Spanning an impressive timeline, it delves into Antiquity, the Medieval era, the pre-classical economics period and the 19th and 20th centuries. Next, the book traces the theoretical contributions from pre-classical, classical and neoclassical economics. It will be illuminating reading for students and researchers of the history of economic thought, industrial organization, microeconomic theory and business history. (shrink)

This article develops a liberal theory of the virtues in business. I first articulate two key liberal values embodied within market society: self-authorship and mutual benefit. Self-authorship is a mode of autonomy given expression through the effective exercise of economic liberties. Mutual benefit involves the intentional pursuit of the well-being of one’s transaction partners within economic exchange. These values are uniquely realized, I argue, within business, conceptualized as a distinct, firm-level, social practice. More specifically, individuals realize self-authorship (...) by purposively integrating cospecialized resources, forms of knowledge, and business functions to facilitate mutually beneficial transactions. Through their commitment to mutual benefit, businesspersons establish ongoing, cooperative relationships with customers, members of other firms, and various stakeholders more generally. These relationships are constitutive of a distinct liberal notion of the common good. The practice of business and the common good in a market society are sustained by a range of individual-level virtues. I recount these virtues and, before concluding, discuss several other theoretical implications of this account. (shrink)

I carved a massive cake of beeswax into bits and rolled them in my hands until they softened … Going forward I carried wax along the line, and laid it thick on their ears. They tied me up, then, plumb amidships, back to the mast, lashed to the mast, and took themselves again to rowing. Soon, as we came smartly within hailing distance, the two Sirens, noting our fast ship off their point, made ready, and they sang … The lovely (...) voices in ardor appealing over the water made me crave to listen, and I tried to say ‘Untie me!’ to the crew, jerking my brows; but they bent steady to the oars. (shrink)

Various authors advocate consideration of stakeholder value concerns in organizational decision making. Brenner and Cochran (1990, 1991) propose a stakeholder theory of the firm which contains several propositions and a stakeholder value matrix. In order to begin any stakeholder rnodel validation, an approach is needed to measure stakeholder value and influence weights. We propose a multicriteria decision modeling approach, utilizing the analytic hierarchy process, to estimate stakeholder value matrix weights. This approach is illustrated using a simplified example and (...) suggestions are made regarding the process needed to begin to validate the stakeholder theory of the firm. (shrink)

This article draws on key models of monitoring and blockholding articulated in the incomplete contracts theory of the firm. Under incomplete contracts theory, different governance systems have incentive structures that entail different tradeoffs—tradeoffs between ownership concentration and liquidity, between monitoring and management initiative, and between private rent-seeking and activity benefiting shareholders as a group. The tradeoffs delimit opportunities for productive cross-reference. More specifically, blockholder systems, such as those in Europe, subsidize monitoring by permitting blockholders to reap private (...) benefits of control through self-dealing and insider trading. Market systems, such as those in the United States and Britain, regulate such private rent-seeking toward the end of maintaining an institutional framework that supports diffuse share ownership and liquid trading markets. It follows that a legal framework conducive to blockholding may be ill-equipped to foster dispersed equity ownership and thick trading markets and that a legal framework conducive to liquid trading markets may have properties that discourage blockholding. This gives rise to questions for law reform agendas on both sides of the Atlantic. In the United States, proponents ask for deregulation of controls on institutional investors, looking to encourage blockholding and more effective monitoring. In Europe, proponents ask for stronger securities regulation, looking to encourage deeper trading markets. This article suggests that each reform program may lead to disappointing results because neither assures conforming adjustments to the pertinent actors’ incentives. Alternatively, strict reforms that materially change prevailing incentive patterns could perversely destabilize workable arrangements without assuring the appearance of more effective alternatives. (shrink)

In recent years, copyright governance for short videos has become a hot issue of common concern in the academic community and the industry. Therefore, this study intends to explore the economic aspect of copyright governance in relation to the proliferation of infringing short videos. The short video industry of China has been taken as a case to demonstrate the copyright governance issue. Transaction cost theory has been applied to analyze the economic aspect of copyright governance in terms (...) of four dimensions: bounded rationality, opportunism, environmental uncertainty, and asset specificity. From the perspective of transaction cost economics, the problem of short video infringement is observed to be essentially a market failure due to high transaction costs. In the short video market, substantial transaction costs are incurred in the legal transaction of copyright with these costs considered to be too high. This is especially the case when transaction costs exceed the net proceeds initially expected by short video users from the authorization, making it impossible to carry out the transaction and leading to infringement. To effectively control the copyright infringement of short videos, it is necessary to build a cross-platform information-sharing mechanism to reduce search costs, establish a unified copyright management platform to reduce coordination costs, and give full attention to the role of technical support to reduce regulatory costs. (shrink)

We present two prudent semantics within Dung's theory of argumentation. They are based on two new notions of extension, referred to as p-extension and c-extension. Two arguments cannot belong to the same p-extension whenever one of them attacks indirectly the other one. Two arguments cannot belong to the same c-extension whenever one of them indirectly attacks a third argument while the other one indirectly defends the third. We argue that our semantics lead to a better handling of controversial arguments (...) than Dung's ones. We compare the prudent inference relations induced by our semantics w.r.t. cautiousness; we also compare them with the inference relations induced by Dung's semantics. (shrink)

This paper outlines different types of knowledge and how they are applied to different problem types. It makes the case that co-created knowledge, generated by innovative and collaborative partnerships of scholars within a transdisciplinary framework is best suited to address the most complex and therefore most important problems in food systems scholarship. It applies Transaction Costs theory to highlight some of the options we scholars face and applies these concepts to the issue of Payments for Ecosystems Services., with (...) an analogy and questions to ponder. (shrink)

Standard accounts on the nature of the firm are highly dependent on explanations by Coase, coupled with inputs from agency theory and shareholder theory. This paper carries out their critique in light of personalist and common good postulates. It shows how personalist and common good principles create a framework that not only accommodates business ethics better but also affords a more compelling understanding of business as a whole.

This article provides a method for estimating the bounds of transaction costs in horizontal mergers. Consider, for example, a completed monopoly merger in linear Cournot oligopolies with 10 symmetric firms. The method shows that its transaction costs are at most 25% (78%) of total premerger profits if there is zero (100%) excess capacity. Such estimations can be extended in a straightforward manner to other mergers and other oligopoly models. The estimation is based both on the profitability precondition, and (...) on the non-empty core precondition, which postulates that the split of a merger’s profits be in its core. The article shows that the core in linear Cournot oligopolies has a non-empty interior, and indicates that the non-empty core precondition also sheds new lights on understanding important issues such as the stylized fact that mergers are likely to occur in markets plagued by excess capacities; why profitable mergers might not be formed; and why completed mergers might break up in the future. (shrink)

Hegel’s practical philosophy has important insights for understanding the ethical role of the firm in modern society. From a broadly Hegelian perspective, the firm’s role in society is to facilitate freedom, that is, the concrete realization of rational agency. It does this by providing the institutional structures, norms, practices, and modes of discourse necessary for individuals to link their subjective aims with objectively valid societal aims, embodied in the firm’s purpose. Accordingly, I first present a Hegelian account (...) of the link between action and social structure, before arguing that the firm, when it functions properly, enables individuals to express their capacity for rational agency within concrete social contexts. I then draw upon Paul Adler’s Marxist analysis of the development of organizational structures and processes to support the viability of a broadly Hegelian account of the firm within a contemporary economic context. I conclude by outlining a number of practical implications of this account, before explaining its implications for two prominent theories of business ethics, the MacIntyrean perspective, and the Market Failures Approach. (shrink)

The conflict between agency and stakeholder theories of the firm has long been entrenched in organizational and management literature. At the core of this debate are two competing views of the firm in which assumptions and process contrast each other so sharply that agency and stakeholder views of the firm are often described as polar opposites. The purpose of this paper is to show how agency theory can be subsumed within a general stakeholder model of the (...) firm. By analytically deconstructing the assumptions of agency theory, it is argued that agency theory: (1) must include a recognition of stakeholders; (2) requires a moral minimum to be upheld, which places four moral principles above the interests of any stakeholders, including shareholders; (3) consists of contradictory assumptions about human nature and which give rise to the equally valid assumptions of trust, honesty and loyalty to be infused into the agency relationship. In this way, stakeholder theory is argued to be the logical conclusion of agency theory. Empirical hypotheses are presented as a means to substantiate this claim. (shrink)

The conflict between agency and stakeholder theories of the firm has long been entrenched in organizational and management literature. At the core of this debate are two competing views of the firm in which assumptions and process contrast each other so sharply that agency and stakeholder views of the firm are often described as polar opposites. The purpose of this paper is to show how agency theory can be subsumed within a general stakeholder model of the (...) firm. By analytically deconstructing the assumptions of agency theory, it is argued that agency theory: (1) must include a recognition of stakeholders; (2) requires a moral minimum to be upheld, which places four moral principles above the interests of any stakeholders, including shareholders; (3) consists of contradictory assumptions about human nature and which give rise to the equally valid assumptions of trust, honesty and loyalty to be infused into the agency relationship. In this way, stakeholder theory is argued to be the logical conclusion of agency theory. Empirical hypotheses are presented as a means to substantiate this claim. (shrink)

Corporate anti-corruption initiatives can make a substantial contribution towards curtailing corruption and advancing efforts to achieve the United Nations’ Sustainable Development Goals. However, researchers have observed that underdeveloped assumptions with respect to the conceptualization of corruption and how firms respond to corruption risk impeding the efficacy of anti-corruption programs. We investigate the relationship between the perceived level of corruption in foreign host countries and the organizational structure of subsidiary operations established by multinational corporations. Foreign host market corruption is disaggregated into (...) two components—private and public corruption. We employ an uncertainty-based perspective grounded in transaction cost theory to focus upon the distinct mechanisms through which private and public corruption can each be expected to impact a foreign subsidiary’s organizational structure [wholly-owned subsidiary or a joint venture with a local partner]. We expect that each type of corruption fosters a different type of uncertainty which predominates in shaping the MNC’s choice of foreign subsidiary investment structure. Hypotheses are developed and tested with a sample of 187 entries into 19 foreign host markets. Each type of corruption was found to exert a distinct effect upon the organizational structure of foreign subsidiaries. More precisely, while heightened perceived levels of public corruption were found to motivate MNCs to invest through a JV with a local partner rather than a WOS, more pronounced private corruption precipitated the opposite outcome. (shrink)

This paper compares two theories of the firm used to interpret firms’ corporate social strategies in order to derive new insights and questions in this research area. Researchers from many branches of strategic management agree that firms can strategically allocate resources in order to achieve both long-term social objectives and competitive advantage. However, despite some progress in investigating corporate social strategy, studies rely on fundamentally diverging theoretical approaches. This paper will identify, compare and begin to integrate two competing theories (...) of the firm implicit in corporate social strategy scholarship: the resource-based and behavioural theories of the firm. I discuss the implications of these two theories for both researchers and practitioners on key debates within corporate social strategy, and conclude by suggesting several fruitful avenues for future research based on the emerging integration of these two theories of the firm within the strategy literature. (shrink)

This article proposes a theory of the firm based on the concept of common good provided by the Aristotelic-Thomistic and Catholic Social Thought traditions, with particular attention given to the concept of work. We argue that the incorporation of a concept of work, based on the A-T and CST traditions, provides a better understanding of the firm´s common good in terms of sociability, cooperation, personal fulfillment and friendship. In this manner, taking into account an A-T and CST (...) concept of work, we provide a better understanding of different aspects in which the common good can be achieved within the firm. (shrink)

Politics and Modernity provides a critical review of the key interface of contemporary political theory and social theory about the questions of modernity and postmodernity. Review essays offer a broad-ranging assessment of the issues at stake in current debates. Among the works reviewed are those of William Connolly, Anthony Giddens, J[um]urgen Habermas, Alasdair MacIntyre, Richard Rorty, Charles Taylor and Roy Bhaskar. As well as reviewing the contemporary literature, the contributors assess the historical roots of current problems in the (...) works of Nietzsche and Max Weber. (shrink)

Regulation is often applied to business behavior to ensure that the social costs of doing business are included in the cost and pricing structures of the firm. Because the consumer benefits from the transaction that generated the social costs, asking the consumer to bear the burden imposed by the transaction is fair. However, there may be a lack of Justice m the internal and external distribution of the social costs of doing business if consumers are the (...) only party bearing that burden, or if the costs are being shifted to employees or taxpayers when a closer stakeholder is also benefiting from the transaction – the stockowner. A social justice perspective requires that those benefiting from a transaction share in the burdens of it. We propose that a Tobin-like tax on stock transactions might be a just means of achieving greater justice in the distribution of the social cost burden. (shrink)

Since ought implies can, i.e., one cannot be obligated to do what one cannot do, the question of corporate responsibility cannot be discussed intelligibly without an inquiry into the range of corporate or managerial discretion. Hence, the moral relevance of a theory of the firm. Within classical or neo-classical economic theory, for instance, firms which act other than to maximize profit are eliminated. They cannot do otherwise, and thus either have no obligations at all or only the (...) duty to maximize profit. The thesis of the Managerial Revolution, if true, establishes only that management is free from direct stockholder control. By asserting that corporations have responsibilities to do other than maximize profit, philosophers assume a wide degree of managerial discretion, without considering recent developments in the theory of the firm which suggest that new incentives and constraints radically restrict managerial liberty in a capitalist society. (shrink)

Stakeholder theory provides a framework for investigating the relationship between corporate social performance (CSP) and corporate financial performance. This relationship is investigated by examining how change in CSP is related to change in financial accounting measures. The findings provide some support for a tenet in stakeholder theory which asserts that the dominant stakeholder group, shareholders, financially benefit when management meets the demands of multiple stakeholders. Specifically, change in CSP was positively associated with growth in sales for the current (...) and subsequent year. This indicates that there are short-term benefits from improving CSP. Return on sales was significantly positively related to change in CSP for the third financial period, indicating that long-term financial benefits may exist when CSP is improved. (shrink)

Economics in general, and the theory of the firm more specifically, places motivation and cognition in very different analytical boxes, in spite of cognitive science evidence that the boundaries between the two are in reality blurred. While this analytical assumption has often served the theory of the firm well, a number of organizational phenomena are better understood if cognition and motivation are allowed to interact, for example, through framing effects, as organizational scholars have long argued. The (...) paper exemplifies by developing the implications of this for Williamson’s notion of the “impossibility of selective intervention.”théorie de la firme en particulier placent la motivation et la connaissance dans des boites analytiques très différentes, en dépit de preuves scientifiques affirmant que les deux se confondent dans la réalité. Même si cette hypothèse analytique a souvent été utile dans la théorie de la firme, certains phénomènes organisationnels sont mieux compris si on permet à la connaissance et à la motivation de réagir réciproquement, par exemple à travers des effets d’“encadrement ” comme les théoriciens des organisations le soutiennent depuis longtemps. Ce papier illustre cette interaction en développant les implications de l’effet d’encadrement pour la notion d’“impossibilité d’intervention sélective” de Williamson. (shrink)

This paper explores an approach for formulating a prescriptive theory of the firm that integrates economic and ethical criteria to guide strategic and operationalconduct of managers. A prescriptive theory posits goal optimization. A “constrained multiple goal optimization” approach models the firm as a broad set of multiple goals and multiple constraints, the latter both internal and external. An exploration begins with no assumptions concerning whether economics and ethics are compatible or antithetical. If the two approaches are (...) mutually reinforcing, a win-win situation obtains. If the two approaches are in win-lose conflict, a key issue is which approach is hierarchically superior or whether the two approaches can be weighted relatively. (shrink)

Over the last two decades, the Japanese notion of ba, introduced by Ikujiro Nonaka and his associates to the West, has come to play an important role in management theory. This notion, which has been roughly translated as ‘place’ or ‘topos,’ stresses the importance of processual spatial thinking for economics and management alike. As such, it echoes and amplifies recent voices in the business world, which argue that we must understand business strategy in terms of space, that is to (...) say, as an expression of the dynamics of social interaction which involves such factors as connectivity, information flow, external versus tacit knowledge, etc. Despite many efforts, the barriers for fully integrating ba into the body of Western management literature will remain for as long as its underlying assumptions are defined by ontologically static categories. This article is an attempt to overcome this theoretical bottleneck, first by critiquing the sub optimal approach to processual problems generated by conventional Western business theories, which can neither recognise their hidden background assumptions about space nor transcend them, and second, by explaining, within the framework of comparative analysis, how ba leads to a new processual and dynamic account of business life. Our overall aim is to demonstrate how a new processual notion of space enables a deeper, more integrated understanding not only of the nature of the firm, but also of the role managers play within firms. (shrink)