Articles (under construction)
See also Working Papers, Book Chapters, and Books.
2012
(with Mia Reinholt and Torben Pedersen). “Why a Central Network Position Isn’t Enough: the Moderating Roles of Motivation and Ability for Knowledge Sharing in Employee Networks.” Academy of Management Journal (2012).
Contrasting views exist on how network characteristics predict knowledge sharing. While large, open egocentric networks foster network positions that provide access to non-redundant knowledge, critics highlight that they impair knowledge sharing, because trust and reciprocity do not thrive in such networks. This problem may, however, be resolved by including motivation and ability to share knowledge as moderators of the association between network position and knowledge sharing. Our analysis of 705 employees in a consultancy shows that employees’ knowledge acquisition and provision are highest when network centrality, autonomous motivation, and ability are all high, thus supporting the proposed three-way interaction.
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(with Bo Nielsen). "Collaborative Advantage: Multi-level Issues,“ Journal of CENTRUM Cathedra (2012).
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2011
(with Siegwart Lindenberg). „Managing Motivation for Joint Production: The Role of Goal Framing and Governance Mechanisms.” Academy of Management Review (2011).
We contribute to the microfoundations of organizational performance by proffering the construct of joint production motivation. Under such motivational conditions individuals see themselves as part of a joint endeavor, each with their own roles and responsibilities, generate shared representations of actions and tasks, cognitively coordinate cooperation, and choose their own behaviors in terms of joint goals. Using goal-framing theory, we explain how motivation for joint production can be managed by cognitive/symbolic management and organizational design.
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(with Keld Laursen and Torben Pedersen) “Linking Customer Interaction and Innovation: The Mediating Role of New Organizational Practices,” Organization Science. (2011).
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“Why Micro-foundations for Resource-based Theory Are Needed and What They May Look Like” Journal of Management (2011).
One of the important events in the development of resource-based theory (RBT) over the past decade has been the call for establishing micro-foundations for RBT. However, the micro-foundations project is still largely an unfulfilled promise. This article clarifies the nature of the micro-foundations project, discusses what it may add in terms of additional explanatory leverage, and specifically addresses micro-foundations in the context of knowledge-based value creation, a key theme in RBT.
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(with Josè Santos). “The MNC as a Knowledge Structure.” Advances in International Management (2011).
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(with Koen Heimeriks, Sidney Winter and Maurizio Zollo). “A Hegelian Dialogue on Organizational Routines,” European Management Review. (2011).
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(with Teppo Felin). “Experience and Repetition as Antecedents of Organizational Routines and Capabilities: A Critique of Behaviorist and Empiricist Approaches,” Journal of Institutional Economics.
We discuss the behaviorist and empiricist foundations of the organizational routines and capabilities literature, specifically the extant emphasis placed on experience, repetition and observation as the key inputs and mechanisms of behavior, learning and change in organizations. Based on this discussion we highlight several concerns associated with specifying experience and repetition as antecedents of routines and capabilities, namely, (1) the problem of origins and causation, (2) the problem of extremes, (3) the problem of intentionality, (4) the problem of new knowledge, and (5) the problem of the environment. We highlight the “poverty of stimulus” argument and more generally discuss how internalist or rationalist, choice-based approach might provide a more fruitful (though preliminary) foundation for extant research on organizational routines and capabilities.
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2010
(with Henk Volberda and Marjorie Lyles). "Absorbing the Concept of Absorptive Capacity: How To Realize Its Potential in the Organization Field," Organization Science (forthcoming 2010).
The purpose of this perspective paper is to advance understanding of absorptive capacity, its underlying dimensions, its multilevel antecedents, its impact on firm performance, and the contextual factors that affect absorptive capacity. Twenty years after the Cohen and Levinthal 1990 paper, the field is characterized by a wide array of theoretical perspectives and a wealth of empirical evidence. In this paper, we first review these underlying theories and empirical studies of absorptive capacity. Given the size and diversity of the absorptive capacity literature, we subsequently map the existing terrain of research through a bibliometric analysis. The resulting bibliometric cartography shows the major discrepancies in the organization field, namely that (1) most attention so far has been focused on the tangible outcomes of absorptive capacity; (2) organizational design and individual level antecedents have been relatively neglected in the absorptive capacity literature; and (3) the emergence of absorptive capacity from the actions and interactions of individual, organizational, and interorganizational antecedents remains unclear. Building on the bibliometric analysis, we develop an integrative model that identifies the multilevel antecedents, process dimensions, and outcomes of absorptive capacity as well as the contextual factors that affect absorptive capacity. We argue that realizing the potential of the absorptive capacity concept requires more research that shows how "micro-antecedents" and "macro-antecedents" influence future outcomes such as competitive advantage, innovation, and firm performance. In particular, we identify conceptual gaps that may guide future research to fully exploit the absorptive capacity concept in the organization field and to explore future fruitful extensions of the concept.
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(with Kenneth Husted and Snejina Michailova). “Governing Knowledge Sharing in Organizations,” Journal of Management Studies 47: 455-482.
We discuss and examine recent claims that research on knowledge processes has paid insufficient attention to micro (individual) level constructs and mechanisms and to the role of formal organization in governing knowledge processes. We review knowledge sharing research published in 13 (top academic plus top practitioner-oriented) journals in the period 1996–2006 in relation to these two propositions. The review confirms the claim that the knowledge sharing literature is preoccupied with constructs, processes, and phenomena defined at a macro (collective, organizational) level and pay comparatively little attention to micro level constructs. The review provides less support for the proposition that formal governance mechanisms have been under-researched in comparison to formal organization. Still, the multiple ways in which formal governance mechanisms may interact in influencing knowledge sharing outcomes have been under-researched, as has the interaction between more informal aspects of the firm and formal governance mechanisms. We argue that future research on knowledge sharing needs to fill these gaps.
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(with Peter Abell and Teppo Felin). “Squaring Coleman’s Diagram,” Erkenntnis 73: 385-391.
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(with Paola Gritti). “Customer Satisfaction and Competences: an Econometric Study of an Italian Bank,” Applied Economics Letters (forthcoming 2010).
We empirically address how customer satisfaction and loyalty in the banking industry may affect profitability. This helps to identify the strategy and competencies necessary to benefit from customer relationships which are important sources for improved performance in the banking. We do this by analyzing data collected on 2,105 customers of 118 branches of one of the biggest banks of an Italian banking group. We find that customer satisfaction impacts loyalty, which in turn has a direct effect on financial and non-financial customer value/total customer value/complex customer value. Moreover, loyalty is a mediator between financial and not-financial customer value and two sources of customer satisfaction, namely relationships with the front office and the branch, on the one hand, and the products offered, on the other.
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(with Peter G. Klein). “Alertness, Judgment, and the Antecedents of Entrepeneurship”, Journal of Private Enterprise.
We review and critique Israel Kirzner's concept of the entrepreneur, offering three challenges to his basic analytical framework. First, we characterize Kirzner's emphasis on equilibration as a departure from the causal-realist price theory of Menger and his nineteenth- and twentieth-century followers. Second, we contrast Kirzner's idea of entrepreneurship as discovery with a more realistic, and operationally meaningful, notion of entrepreneurship as action, one that ties together the entrepreneurial and ownership functions. Finally, we discuss an inconsistency in Kirzner's treatment of the antecedents of entrepreneurial discovery.
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(with Lasse Lien). “Ownership and Competitive Dynamics.” Quarterly Journal of Austrian Economics (forthcoming 2010).
Changes in ownership titles are essential to understanding crucial aspects of competitive
dynamics and, more broadly, the market process. There is ample evidence that a crucial
source of productivity growth, and hence welfare, is due to the reallocation of inputs
and outputs from less to the more productive firms. Furthermore, ownership is essential
in stimulating and shaping this reallocation process. However, most economists fail to
explicitly bring in ownership as a relevant analytical category in discussions of such
dynamic processes. We argue that a primary role of ownership in an economy is to
supply fuel and precision to this reallocation process, as argued by Austrian economists,
most notably Ludwig von Mises. Part of the economic function of ownership is that it
eases entrepreneurial speculative activities and provides an incentive to engage in such
activities.
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(with Ellen Roemer). “Real Options and the Theory of the Firm.” International Journal of Learning and Intellectual Capital (forthcoming 2010).
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Micro-foundations for Management Research: What? Why? Whither?", Cuadernos de Economía y Dirección de la Empresa (forthcoming 2010).
2009
(with Teppo Felin). “Social Reality, the Boundary of Self-Fulfilling Prophecy, and Economics,” Organization Science 20: 654-668
Organizational scholars have recently argued that economic theories and assumptions have adversely shaped management practice and human behavior, not only leading to the incorporation of trust-eroding market mechanisms into organizations, but also unnecessarily creating self-interested behavior. A number of highly influential papers have argued that the self-fulfilling nature of (even false) theories provides the underlying mechanism through which economics has adversely shaped not just social science but also management practice and individual behavior. We question these arguments and argue that there are important boundary conditions to theories falsely fulfilling themselves, boundary conditions that have hitherto been unexplored in organizational research, and boundary conditions that question the underlying premises used by organizational scholars and social scientists to attack economics. We specifically build on highly relevant findings from social psychology, philosophy, and organizational economics to show how (1) objective reality and (2) human nature provide two important boundary conditions for theories (falsely or otherwise) fulfilling themselves. We also defend organizational economics, specifically the use of high-powered incentives in organizations, and argue that self-interest (rightly understood) facilitates in creating beneficial individual and collective and societal outcomes.
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(with Teppo Felin). “The Performativity of Theory, Arbitrary Conventions and Possible Worlds: A Reality Check.",” Organization Science 20: 676-678.
We argue that Ferraro, Pfeffer, and Sutton build on a scientifically problematic conception of the relationship between theory and social reality. Specifically, the performativity perspective that they build on makes tenuous assumptions about the role that theories, whether true or not, play in strongly constructing social reality, but the perspective fundamentally ignores central matters related to human nature and the boundaries of possibility. We argue for a more realistic approach to theory building and social science, one that recognizes the role that true theories play in helping us understand and explain reality, but also in turn shaping that reality given this better theoretical understanding.
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(with Dana Minbaeva, Mia Reinholt, and Torben Pedersen). “Stimulating Knowledge Sharing Among Employees: The Contribution of Job Design”, Human Resource Management 48: 871-893.
(abstract)
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(with Dana Minbaeva and Scott Snell). “Bringing the Knowledge Perspective into HRM,” Human Resource Management.48: 477-483.
In this introduction to this Special Issue, we briefly describe the knowledge perspective that has emerged in management research over the last two decades, discuss its current and potential future relations to Human Resources Management (HRM) research, and summarize the papers in this issue.
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(with Rajshree Agarwal, Jay B. Barney and Peter G. Klein). “Heterogeneous Resources and the Current Crisis: Implications of Strategic Management Theory,” Strategic Organization 7: 467-484.
This essay begins by focusing on a fundamental difference in the premises underlying dominant macroeconomic models and strategic management theory: heterogeneity of resources. This underlying assumption regarding resources leads to different fundamental understandings of how economic activity is organized and the roles of individuals, firms and government in economic systems. We then discuss the implications of these different assumptions and understandings for economic policies derived from traditional macroeconomic theory and from strategic management theory.
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(with Lasse Lien). “The Determinants of Industry Concentration: Two New Empirical Regularities.” Managerial and Decision Economics 30: 503-511.
This paper reports two new empirical regularities concerning industry concentration. First, concentration levels closely correlate in related industries. Second, the correlation is moderated by the degree of relatedness between the industries. These regularities are derived from the Trinet database, using a survivor-based measure of relatedness. We argue that these previously overlooked relations may be explained in terms of (1) 
spillover effects
between industries and (2) life cycle factors.
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(with Mark Lorenzen). "Cognitive Coordination ...
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“Alternative Research Strategies in the Knowledge Movement”, European Management Review 6: 16-28.
The emergence over the last two decades or so of ‘knowledge’ as an important part of the explanatory structure of management research is an intellectual breakthrough that is comparable in terms of its transforming impact to the behavioral revolution of the 1960s. A veritable ‘knowledge movement’ has emerged that spans several fields in management. I take stock on alternative research strategies with that movement, distinguishing between ‘capabilities first,’ ‘networks first’ and ‘individuals first’ strategies. Reasons are given why more research attention needs to be allocated to the latter strategy if the knowledge movement is to continue making progress. However, the aim should ultimately be to reach towards multi-level research that combines aggregate constructs with top-down processes and bottom-up processes.
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(with Nils Stieglitz) “Entrepreneurship and Transaction Costs,” Advances in Strategic Management 26: 67-96.
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(with Teppo Felin) “Organizational Routines: Historical Drift, a Course-Correction, and Prospects for Future Work,” Scandinavian Journal of Management, 25: 157-167.
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(with Norman Sheehan). “Exploring the Roots of Porter’s Activity-based View.” Journal of Management and Strategy 2: 240-260.
Porter's activity-based view of the firm is a comprehensive strategic framework which analyzes firm-level competitive advantage. Although Porter's activity-based view is widely cited by academics, taught to students, and applied by practitioners, little is known about its intellectual roots. Given that a framework's intellectual antecedents not only determine its current content, but also its future development, this paper aims to examine the intellectual roots of Porter's activity-based view and the value chain.
2008
(with Peter Abell and Teppo Felin). “Building Microfoundations for the Routines, Capabilities and Performance Link,” Managerial and Decision Economics 29:489-502.
Micro-foundations have become an important emerging theme in strategic management. This paper addresses micro-foundations in two related ways. First, we argue that the kind of macro (or "collectivist") explanation that is utilized in the capabilities view in strategic management - which implies a neglect of micro-foundations - is incomplete. There are no mechanisms that work solely on the macro-level, directly connecting routines and capabilities to firm-level outcomes. While routines and capabilities are useful shorthand for complicated patterns of individual action and interaction, ultimately they are best understood at the micro-level. Second, we provide a formal model that shows precisely why macro explanation is incomplete and which exemplifies how explicit micro-foundations may be built for notions of routines and capabilities and for how these impact firm performance.
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(with Peter G Klein, Yasemin Kor and Joe Mahoney). “Entrepreneurship, Subjectivism, and the Resource-Based View:Towards a New Synthesis",” Strategic Entrepreneurship Journal 2: 73-94.
This paper maintains that the consistent application of subjectivism helps to reconcile contemporary entrepreneurship theory with strategic management research in general, and the resource-based view in particular. The paper synthesizes theoretical insights from Austrian economics and Penrose's (1959) resources approach, arguing that entrepreneurship is inherently subjective and firm specific. This new synthesis describes how entrepreneurship is manifested in teams, and is driven by both heterogeneity of managerial mental models and shared team experiences.
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(with Kirsten Foss). “Understanding Opportunity Discovery and Sustainable Advantage: the Role of Transaction Costs and Property Rights,” Strategic Entrepreneurship Journal 2: 191-207.
To add insight in new value creation, opportunity discovery should be integrated with strategic management theory. Based on the resource-based view and the economics of property rights, we build a framework that accomplishes this. Our key argument is that property rights and transaction costs are important antecedents of opportunity discovery. We identify two mechanisms that establish this influence and examine alternative ways in which knowledge, transaction costs, and property rights influence opportunity discovery and sustainable advantage. Copyright © 2008 Strategic Management Society.
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(with Christian Bjørnskov). “Economic Freedom and Entrepreneurship: a Cross-Country Analysis,” Public Choice 134: 307-328) (also published as a chapter in Andreas Freytag, ed. Entrepreneurship and Culture. Berlin: Springer, 2010.)
While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use the Economic Freedom Index from the Fraser Institute to ask which elements of economic policy making and the institutional framework are conducive to the supply of entrepreneurship, measured by data on entrepreneurship from the Global Entrepreneurship Monitor. We find that the size of government is negatively correlated and sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship.While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use the Economic Freedom Index from the Fraser Institute to ask which elements of economic policy making and the institutional framework are conducive to the supply of entrepreneurship, measured by data on entrepreneurship from the Global Entrepreneurship Monitor. We find that the size of government is negatively correlated and sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship.
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(with Peter G Klein “The Unit of Analysis in Entrepreneurship Studies: Opportunities or Investments?, International Journal of Entrepreneurship Education 6.
2007
(with Kirsten Foss, Peter G. Klein, and Sandra Klein) “Heterogenous Capital and the Organization of Entrepreneurship,” Journal of Management Studies 44: 1165-1186.
Here we outline an Austrian approach to economic organization based on the entrepreneur and the Austrian idea of capital as heterogeneous and time-dimensioned, two themes associated closely with Kirzner’s (1966, 1973, 1997) contributions. Our unit of analysis is the capital asset. We start with the Austrian concept of heterogeneous capital and provide an economic interpretation of such heterogeneity. In our view, capital assets are heterogeneous to the extent that they possess various attributes, many of which may be unknown to the owners of these assets. Moreover, many attributes are costly to measure. These facts help explain a host of traditional and neglected issues in the theory of economic organization. In other words, the theory of the firm has much to gain from embracing Kirznerian ideas on entrepreneurship and capital heterogeneity
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(with Kirsten Foss and Peter G Klein) “Original and Derived Judgment: an Entrepreneurial Theory of Economic Organization,” Organization Studies 28: 1893-1912.
Recent work links entrepreneurship to the economic theory of the firm, using the concept of entrepreneurship as judgment introduced by Frank Knight. When judgment is complementary to other assets, it makes sense for entrepreneurs to hire labour and to own assets. The entrepreneur's role, then, is to arrange or organize the human and capital assets under his or her control. We extend this Knightian concept of the firm by developing a theory of delegation under Knightian uncetainty. What we call original judgment belongs exclusively to owners, but owners may delegate a wide range of decision rights to subordinates, who exercise derived judgment. We call these employees `proxy-entrepreneurs', and ask how the firm's organizational structure — its formal and informal systems of rewards and punishments, rules for settling disputes and renegotiating agreements, means of evaluating performance and so on — can be designed to encourage forms of proxy entrepreneurship that increase firm value while discouraging actions that destroy value. Building on key ideas from the entrepreneurship literature, Austrian economics and the economic theory of the firm, we develop a framework for analysing the trade-off between productive and destructive proxy entrepreneurship. We link this analysis to the employment relation and ownership structure, providing new insights into these and related issues in the economic theory of the firm.
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(with Ibuki Ishikawa) “Toward a Dynamic Resource-based View,” Organization Studies 28: 749-772.
Over the last two decades, the resource-based view (RBV) has become dominant in the strategic management field. It has often been observed that the RBV is lacking in the dynamic dimension. For example, processes of building competitive advantages by means of combining existing complementary resources in novel ways are not inquired into. We argue that the RBV may profitably draw on insights in entrepreneurship and capital theory, drawn from Austrian economists as well as Frank Knight, in order to strengthen its dynamic dimension. We link the RBV and Austrian ideas in the context of the theory of complex systems pioneered by Herbert Simon. We draw a number of implications for strategic management from this synthesis, notably into resource value and sustainability of competitive advantage.
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“Strategic Belief Management,” Strategic Organization 5: 249-258.
While (managerial) beliefs are central to many aspects of strategic organization, interactive beliefs have been rather neglected. In an increasingly connected and networked economy, firms confront coordination problems that arise because of network effects. The capability to manage beliefs will increasingly be a strategic one, a key source of wealth creation, and a key research area for strategic organization scholars
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“The Knowledge Governance Approach,” Organization 14: 29-52.
An attempt is made to characterize a "knowledge governance approach" as a distinctive, emerging field that cuts across the fields of knowledge management, organisation studies, strategy and human resource management. Knowledge governance is taken up with how the deployment of administrative apparatus influences knowledge processes, such as sharing, retaining and creating knowledge. It insists on clear behavioural foundations, adopts an economizing perspective and examines efficient alignment between knowledge transactions with diverse characteristics and governance structures and mechanisms with diverse capabilities of handling these transactions. Various open research issues that a knowledge governance approach may illuminate are sketched. Although knowledge governance draws clear inspiration from organizational economics and "rational" organization theory, it recognizes that knowledge represents various challenges to more "closed" social science disciplines, notably economics.
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(with Giampaolo Gazzarelli) “Institutions as Knowledge: Ludwig Lachmann’s Institutional Economics,” Cambridge Journal of Economics 31: 789-804.
This article revisits the socioeconomic theory of the Austrian School economist Ludwig M. Lachmann. By showing that the common claim that Lachmann's idiosyncratic (i.e., eclectic and multidisciplinary) approach to economics entails nihilism is unfounded, it reaches the following conclusions. (1) Lachmann held a sophisticated institutional position vis-à-vis economics that anticipated developments in contemporary new institutional economics. (2) Lachmann's sociological and economic reading of institutions offers insights for the problem of coordination.
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“Economic Governance in a Dynamic Global Context: The Center for Strategic Management at the Copenhagen Business School,” European Management Review 4: 183-191.
This paper tells the story of the emergence of distinct research around the theory of the firm at Copenhagen Business School (CBS) within the last two decades, focussing on elements of continuity in the thinking of key CBS persons in the period. It discusses the current research agenda of the Center for Strategic Management and Globalization, a research agenda that may be described as multi-level research in international strategy, based on the economic theory of the firm and strategic management theory, and with a strong emphasis on micro-foundations and knowledge governance. The paper relates the narrative to organizational learning theory.
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“Awards as Compensation: Comment on Frey,” European Management Review 4: 21-23.
(no abstract available)
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(with Normann Sheehan) “Advancing the Resource-based View Through Porterian Activity Analysis.” Management Decision 45, (issue 3): 450-461.
Almost since the inception of the resource-based view (RBV), critics have complained that the view is weak in the prescriptive dimension. A recent statement of this critique is by Priem and Butler, who argue that the RBV does not address value creation. One aspect of this is that the link between resources and value creation is black-boxed. The paper aims to argue that a Porterian activity analysis with a focus on activity drivers can remedy this weakness, and how it brings into focus important implementation issues that are neglected in the RBV.
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“Scientific progress in strategic management: the case of the resource-based view,” International Journal of Learning and Intellectual Capital 4: 29-46
Does the Resource-Based View (RBV) represent a case of scientific progress? And has it emerged as the dominant approach to the understanding of competitive advantage for this reason? Conventional criteria for scientific progress, notably those of the growth of knowledge literature, are not particularly helpful for understanding this. Instead, it is argued that in order to understand why the RBV is an instance of scientific progress, we should begin from the notion that reduction is at the heart of progress in science, and that many scientists implicitly or explicitly hold this view. The RBV is a case of scientific progress because it identified theoretical mechanisms at levels lower than those that were usually investigated in strategy research prior to the RBV. Unfortunately, the micro-emphasis of the RBV gave way during the 1990s to more aggregative modes of theorising (i.e., the capabilities approach). Thus, the RBV represents an 'unfinished revolution' as there is still considerable potential to dig deeper in the deep structure of competitive advantage.
2006
(with Kirsten Foss and José Vasquez-Vicente) “Tying the Manager’s Hands: Credible Commitment and Firm Organization,” Cambridge Journal of Economics 30: 797-818.
We discuss and examine empirically a firm-level equivalent of the ancient problem of ‘tying the King's hands’, namely how to avoid managerial intervention that is undertaken to reap private benefits but is harmful to overall value creation, that is, ‘managerial opportunism’. The link from managerial intervention to firm-level value-creation is moderated by employee motivation. Thus, intervention in the form of managers overruling employees or reneging on delegation may demotivate employees, particularly when the intervention is perceived as being unfair, undertaken for personal gain, etc. We argue that a number of mechanisms, such as managers staking their personal reputation, employees controlling important assets, strong trade unions, etc. may function as constraints on managerial proclivities to intervene, thus reducing the problem of managerial opportunism. We derive four hypotheses from these ideas, and test them, using path-analysis, on a rich dataset, based on 329 firms in the Spanish food and electric/electronic industries.
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(with Teppo Felin) “Individuals and Organizations: Thoughts on a Micro-Foundations Project for Strategic Management,” Research Methodology in Strategy and Management 3: 253-288.
(no abstract available)
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“Knowledge and Organization in the Multinational Enterprise: Some Foundational Issues,” Journal of Management and Governance 10, (issue 1) : 3-20.
This paper addresses the interaction of knowledge and organization in IB research, particularly research on the MNC. The argument is advanced that although the MNC literature is quite advanced with respect to its treatment of firm-level knowledge, several closely connected problems remain. In particular, there has been an over-emphasis on knowledge flows and an under-emphasis on knowledge stocks; the micro-foundations of MNC knowledge are unclear; and there is a no clear understanding of the causal relations between knowledge stocks and flows and organizational control. A control theory approach that may resolve some of these problems is then sketched.
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(with Kirsten Foss) “Entrepreneurship, Transaction Costs, and Resource Attributes” International Journal of Strategic Change Management 1: 53-60.
This paper responds to Kim and Mahoney’s “How Property Rights Economics Furthers the Resource-Based View: Resources, Transaction Costs and Entrepreneurial Discovery” (a comment on Foss and Foss, 2005). While we agree with many of their arguments, we argue that they fail to recognise how exactly transaction costs shape the process of entrepreneurial discovery. We provide a sketch of the mechanisms that link entrepreneurship, property rights, and transaction costs in a resource-based setting, contributing further to the attempt to take the RBV in a more dynamic direction.
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(with Kirsten Foss) “The Limits to Designed Orders: Authority under “Distributed Knowledge,” Review of Austrian Economics 19: 261-274.
We examine the argument, put forward by modern management writers and, in a somewhat different guise by Austrian economists, that authority is not a viable mechanism of coordination in the presence of “distributed knowledge” (which corresponds to Hayek’s treatment of the use of dispersed knowledge in society). We define authority and distributed knowledge and argue that authority is compatible with distributed knowledge. Moreover, it is not clear on theoretical grounds how distributed knowledge impacts on economic organization. An implication is that the Austrian argument that designed orders are strongly constrained by the Hayekian knowledge problem (Hayek, Kirzner, Sautet) is shaky. The positive flipside of this argument is that Austrians confront an exciting research agenda in theorizing how distributed knowledge impacts economic organization.
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(with Kirsten Foss) “Simon on problem solving: implications for new organisational forms,” International Journal of Learning and Intellectual Capital 3: 339-356.
Two of Herbert Simon's best-known papers are 'The Architecture of Complexity' and 'The Structure of Ill-Structured Problems.' We discuss the neglected links between these two papers, highlighting the role of decomposition in the context of problems on which constraints have been imposed as a general approach to problem solving. We apply these Simonian ideas to organisational issues, specifically new organisational forms. Specifically, Simonian ideas allow us to develop a morphology of new organisational forms and to point to some design problems that characterise these forms.
2005
(with Kirsten Foss) “Value and Transaction Costs: How the Economics of Property Rights Furthers the RBV,” Strategic Management Journal 26: 541-553.
Property rights economics furthers the resource-based view of strategic management in a number of ways. First, resources are conceptualized as being composed of multiple attributes for which property rights may be held. Second, a resource owner's ability to create, appropriate, and sustain value from resources depends on the property rights that he or she holds and on the transaction costs of exchanging, defining, and protecting them. While transaction costs are a major source of value dissipation, reducing such dissipation may create value. Implications for the RBV analysis of sustained competitive advantage are derived.
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(with Keld Laursen) “Performance Pay, Delegation, and Multitasking Under Uncertainty and Innovativeness: an Empirical Investigation,” Journal of Economic Behavior and Organization 58: 246-276.
It has been recently noted that the trade-off between risk and incentives that agency theory predicts turns out to be rather weak. We examine predictions from agency theory on the basis of data from a data set encompassing close to 1000 Danish firms. We find that the relation between performance pay and environmental uncertainty is indeed weak. We examine the relation between delegation and environmental uncertainty, and find that this relation is confirmed. We also examine the multi-tasking agency hypothesis that as risk increases, the flexibility of agents is restricted. We fail to find support for this hypothesis.
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(with Teppo Felin) “Strategic Organization: a Field in Search of Microfoundations.” Strategic Organization 3: 441-455. (Awarded the "SO!WHAT" Awards for Scholarly Contribution for Volume 3 (2005) of SO!)
Our particular focus in this essay is on the organizational capabilities-based literature in strategic management. This focus serves as a specific example of a more general problem of lack of attention to individuals in strategic organization. (Wider implications could be explicated given more space.) As brief support for the fact that our discussion does have wider ramifications, we note that Selznick has also quite poignantly raised the need for micro-foundations on the part of institutional scholars (1996: 274). Whetten (2004) also highlights the fact that scholars are rarely explicit about what they mean by ‘organizational’.
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(with Torben Andersen) “Strategic Opportunity and Economic Performance in Multinational Enterprises: The Role and Effects of Information and Communication Technology,” Journal of International Management 11: 293-310.
Recent work on multinational enterprises (MNEs) argues that diversity in terms of the markets they serve and the environments they acquire inputs from provides strategic opportunity unavailable to purely domestic firms. However, MNEs are also exposed to higher levels of complexity and uncertainty due to the presence in different locations and confront associated needs to integrate and coordinate activities. This paper suggests that the attendant cost–benefit tradeoff can be influenced by computer-mediated communication. Based on a sample of 88 organizations in the computer products industries, we find that multinationality in itself does not guarantee a higher level of strategic opportunity. Instead, use of information technology to facilitate communication among managers across functional and geographical boundaries enhances coordination of multinational activities in the development of strategic opportunity, which in turn is associated with superior performance.
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“Transaction Cost Economics in Scandinavia,” Scandinavian Journal of Management 21: 5-17.
This Introduction briefly surveys transaction cost economics and explains its general relevance for business administration. A discussion of the impact of transaction cost economics on Scandinavian work in business administration is offered, after which the contributions to the present Special Issue are introduced.
2004
(with Torben Pedersen) “Governing Knowledge Processes in the Multinational Corporation,” Journal of International Business Studies 35: 339-349.
This Introduction discusses the contrast between, on the one hand, the current popularity of addressing MNC organization in knowledge terms and, on the other, the lack of adequate understanding of many of the causal mechanisms and contextual factors in relations between knowledge processes and organizational factors. A number of the relevant research challenges are identified, and it is clarified how the five articles in this Focused Issue addresses some of these.
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(with Kirsten Foss) “The Next Step of Evolution of the Resource-based View: Integration with Transaction Cost Economics,” Management Revue 15: 1-16.
This essay addresses the role of transaction cost economics (TCE) in advancing the resource-based view. In particular, it is argued that TCE has the potential to remedy a number of weak spots in the RBV, such as the absence of attention in the RBV to the interaction between value creation and value appropriation. This and other weak spots in the RBV stem from not taking account of transaction costs to a sufficient extent. Integrating TCE with the RBV adds new insight into the analysis of sustained competitive
advantage.
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(with Tore Kristensen and Ricky Wilke) “Corporate Communication in the Emerging Network Economy: A Provider of Common Knowledge,” Corporate Communication 9: 43-49.
This paper draws on ideas in economics and game theory to develop a new theory of marketing in the emerging network economy. The paper argues that in a network economy, firms and consumers will confront “coordination problems”. With the emerging network economy all this becomes urgent because the availability and cost of information decreases. Also, timing issues become urgent as millions of people get access to the same information simultaneously. That explains why events where masses of viewers simultaneously participate in the same events become so important. The paper introduces a simple game theoretic model and discusses marketing applications and possible strategies. These strategies imply considerable use of communication resources in order to fulfil the common knowledge requirements.
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“Cognition and Motivation in the Theory of the Firm,” Journal des Economistes et des Etudes Humaines 13.
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.”
2003
“Selective Intervention and Internal Hybrids: Interpreting and Learning from the Rise and Decline of the Oticon Spaghetti Organization.” Organization Science 14: 331-349.
Infusing hierarchies with elements of market control has become a much-used way of simultaneously increasing entrepreneurialism and motivation in firms. However, this paper argues that such “internal hybrids,” particularly in their radical forms, are inherently hard to successfully design and implement, because of fundamental credibility problems related to managerial promises to not intervene in delegated decision-making ¾ an incentive problem that is often referred to as the “problem of selective intervention.” This theoretical theme is developed and illustrated, using the case of the world-leading Danish hearing aids producer, Oticon. In the beginning of the 1990s, Oticon became famous for its radical internal hybrid, the ”spaghetti organization.” Recent work has interpreted the spaghetti organization as a radical attempt to foster dynamic capabilities by imposing loose coupling on the organization, neglecting, however, that about a decade later, the spaghetti organization has given way to a more traditional matrix organization. This paper presents an organizational economics interpretation of organizational changes in Oticon, and argues that a strong liability of the spaghetti organization was the above incentive problem. Motivation in Oticon was strongly harmed by selective intervention on the part of top-management Changing the organizational structure was one means of repairing these motivational problems. Refutable implications are developed, both for the understanding of efficient design of internal hybrids, and for the more general issue of the distinction between firms and markets, as well as the choice between internal and external hybrids.
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“Bounded rationality in the economics of organization: “Much cited and little used,” Journal of Economic Psychology 24: 245-264.
Herbert Simon was the apostle of bounded rationality. He very often illustrated bounded rationality in the context of the theory of the firm, and was, of course, a major contributor to organizational theory. However, in spite of Simon’s efforts, I argue that bounded rationality has been only incompletely absorbed in the economics of organization, is little used for substantive purposes, and mostly serves a rhetorical function. In order to substantiate these claims, I discuss and compare alternative approaches to integrating bounded rationality with the theory of economic organization. I argue that in general bounded rationality is treated “thinly,” and is actually not necessary for producing the main insights of these theories. The paper ends with a brief discussion of how to proceed with integrating richer notions of bounded rationality with the theory of economic organization.
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(with Thorbjørn Knudsen) "The Resource-based Tangle: In Search of Sustainable Foundations,” . Managerial and Decision Economics 24: 291-307.
To advance the RBV we propose separation of necessary and additional conditions for the expression of SCA. We argue that there are only two necessary conditions, namely uncertainty and immobility and that all other conditions are additional.
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“The Strategic Management and Transaction Cost Nexus: Past Debates, Central Questions, and Future Research Possibilities,” Strategic Organization 1: 139-169.
The role of transaction cost economics (broadly conceived) in developing research in strategic management has been a hotly debated topic over the last decade. This methodological essay develops the argument that transaction cost insights are more than merely useful complements to existing approaches to strategic management. Rather they are necessary for adequately understanding the nature of strategizing, because transaction costs are essential aspects of processes of creating, capturing and protecting value. If transaction costs are zero, these processes do not pose any strategic problems. However when transaction costs are positive, opportunities for value creation through the reduction of inefficiencies caused by transaction costs exist, and protecting and appropriating value are costly activities that dissipate value. The use in strategic management of models in which the fullest possible account of transaction costs is taken is contrasted with more constraining models, in particular the patched-up competitive equilibrium models that are now used as the benchmark models in some important parts of strategic management research, most notably in the core models of the resource-based view.
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“Bounded Rationality and Tacit Knowledge in the Organizational Capabilities Approach: an Evaluation and a Stocktaking,” Industrial and Corporate Change 12: 185-201.
The famous three chapters in Nelson and Winter's An Evolutionary Theory of Economic Change (1982) that focus on firm routines and capabilities are often taken to be solidly founded on an assumption of bounded rationality. I argue that, in actuality, bounded rationality plays a rather limited role in Nelson and Winter (1982), that the very different assumption of tacit knowledge is much more central, and that the links between bounded rationality and routines/capabilities are not clear. I then argue that the absence in Nelson and Winter of a clear methodological individualist foundation for notions such as routines, capabilities, competencies, etc., has resulted in certain explanatory difficulties in the modern organizational capabilities approach that has taken so much inspiration from their work.
(with Keld Laursen) “New HRM Practices, Complementarities, and the Impact on Innovation Performance” , Cambridge Journal of Economics 27: 243-263.
In this paper, we take our theoretical point of departure in recent work in organisational economics on systems of human resource management (HRM) practices. We develop the argument that just as complementarities between new HRM practices influence financial performance positively, there are theoretical reasons for expecting them also to influence innovation performance positively. We examine this overall hypothesis by estimating an empirical model of innovation performance, using data from a Danish survey of 1,900 business firms. Using principal component analysis, we identify two HRM systems which are conducive to innovation. In the first one, seven of our nine HRM variables matter (almost) equally for the ability to innovate. The second system is dominated by firm-internal and firm-external training. Of the total of nine sectors that we consider, we find that the four manufacturing sectors correlate with the first system. Firms belonging to wholesale trade and to the ICT intensive service sectors tend to be associated with the second system.
2002
(with Torben Pedersen) ”Sources of Subsidiary Knowledge and Organizational Means of Knowledge Transfer”, Journal of International Management 8: 49-67.
We link up with the recent literature on the differentiated MNC and in particular with its stress on intra-MNC knowledge flows. However, rather than focusing on the characteristics of knowledge as determinants of knowledge transfer within MNCs, we focus instead on levels of knowledge in subsidiaries, the sources of transferable subsidiary knowledge and on the organizational means and conditions that realize knowledge transfer as the relevant determinants. We find largely positive support for the relevant hypotheses. These are tested on a unique dataset on knowledge development in subsidiary firms [the Centre of Excellence (CoE) project].
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“Coase vs. Hayek: Economic Organization in the Knowledge Economy,” International Journal of the Economics of Busines 9: 9-36. Reprinted (in a Russian translation) in Maxim Bruhanov, ed. Socio-Economic Fundamentals of the Information Society.
Many writers argue that economic organization is undergoing major transformation in the emerging knowledge economy; authority relations are withering; legal and ownership-based definitions of the boundaries of firms are becoming irrelevant and there are increasingly few constraints on the set of feasible combinations of coordination mechanisms. The present paper critically deals with these claims, beginning from the basic idea that they may be analysed as turning on the implications for the Coasian firm of the Hayekian notion that the distributed knowledge is a strong constraint on the use of planned coordination. It argues that there are efficiency reasons for the existence of authority under Hayekian distributed knowledge; that the increasing importance of knowledge in production does not render legal and ownership-based notions of the boundaries of the firm irrelevant; and that coordination mechanisms will also cluster in certain, predictable combinations in the emerging knowledge economy. Thus, Coasian firm organization is consistent with Hayekian knowledge conditions.
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“Introduction: New Organizational Forms - Critical Perspectives,” International Journal of the Economics of Business 9: 1-8.
(no abstract available)
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“Whither Economic Organization?,” Zeitschrift für Betriebswirtschaftsforschung: 57-67.
Arguments and observations that strong economy-wide transformations in economic organization are taking place have been steadily accumulating in sociology and business administration for about two decades or so, but economists have only relatively recentlyjoined the discussion (e.g., Siebert 1995). While early discussions emphasized the increasing importance of various kinds of network governance, recent discussion appears to have predominantly cast the theme of transforming economic organization in the context of the emerging knowledge economy (e.g., Zucker 1991; Liebeskind et al., 1995; Grant 1996; Cowen and Parker 1997; Miles et al. 1997; Hodgson 1998; Mendelsson and Pillai 1999).
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(with Kirsten Foss) ”Organizing Economic Experiments: Property Rights and Firm Organization,” Review of Austrian Economics 15:4, 297–312.
This paper aims at establishing links between market process economics (Boettke and Prychitko 1996) and the theory of economic organization, primarily the theory of the firm (Coase 1937,Williamson 1996, Hart 1995, Barzel 1997). To be sure, these links have been explored in previous contributions. For example, earlier work has assessed the contribution of Mises’ (1936, 1949) analysis of economic calculation to the understanding of the efficient boundaries of the firm (Klein 1996), including issues of corporate governance (Klein and Klein 2001), or the contribution to knowledge about the internal organization of firms of Hayek’s (1945) insights in dispersed knowledge (Jensen and Meckling 1992, Cowen and Parker 1997, Foss 1999), or how Austrian economics may inform the study of firm strategy (Jacobson 1992, Lewin and Phelan 2000). However, the perspective in the present paper is different from these contributions.
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(with Kirsten Foss, Peter Klein and Sandra Klein) “Heterogeneous Capital, Entrepreneurship, and Economic Organization,” Journal des Economistes et des Etudes Humaine 12: 79-96.
One of Israel Kirzner’s less wellknown contributions is to the theory of capital. In this paper, we link the Austrian theory of capital and the theory of economic organization. Our starting point is the key Austrian notion of capital heterogeneity which we interpret in terms of attributes. Most capital assets are multi-attribute in nature, and many attributes may not be known to entrepreneurs. This fosters a need for experimenting with capital combinations. Because there are costs of measuring attributes, this process has implications for economic organization. Thus, we argue that novel implications for the understanding of ownership and the existence and boundaries of firms may be teased out of such a perspective.
2001
(with Kirsten Foss) “Assets, Attributes and Ownership,” International Journal of the Economics of Business 8 (issue 1): 19-37.
The notion of full asset ownership is important in economics, for example, in recent work on the boundaries of the firm. Much of this work has been taken up with the issue why it matters who owns an asset. However, recognizing that assets have multiple attributes, and that these may be subject to capture in a world of positive measurement and enforcement costs, implies that the notion of full asset ownership is problematic. New property rights theorists sidestep these issues by implicitly assuming that residual rights of control are perfectly enforced (i.e. full asset ownership obtains). We discuss the notion of property rights and ownership in a setting characterized by positive costs of enforcement, and suggest that in such a setting, the new property rights model is a part of a more overarching perspective, which also includes older contributions to property rights economics.
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”Leadership, Beliefs and Coordination,” Industrial and Corporate Change 10: 357-388.
Although recent economics contributions represent important strides forward in the understanding of leadership behavior, the cognitive and symbolic dimensions of the phenomenon have attracted virtually no interest from economists and game theorists. I argue that an understanding of these dimensions may be founded on coordination games, particularly to the extent that these illustrate interactive belief formation. In this context leadership is defined as the taking of actions that coordinate the complementary actions of many people through the creation of belief conditions that substitute for common knowledge and where these actions characteristically consists of some act of communication directed at those being led. The concept of common knowledge (or its approximation by means of notions of common belief) is argued to be particularly important to understanding leadership. Thus, leaders may establish common knowledge conditions, and assist the coordination of strategies in this way, or make decisions in situations where coordination problems persist in spite of common knowledge.
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”Bounded Rationality in the Economics of Organization: Present Use and Future Possibilities,” Journal of Management and Governance 5: 401-425.
The way in which bounded rationality enterscontemporary organizational economicstheorizing is examined. It is argued that,as it is being used, bounded rationalityis not necessary for producing the results of organizationaleconomics. It is at best a rhetorical device,used for the purpose of loosely explainingincomplete contracts. However, it is possibleto incorporate much richer notions of boundedrationality, founded on research in cognitivepsychology, and to illuminate the study ofeconomic organization by means of such notions. A number of examples are provided.
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”Simon’s Grand Theme and the Theory of Economic Organization,” Journal of Management and Governance 5: 216-223.
In a series of methodologically oriented papers, Herbert Simon (e.g., 1976, 1978, 1979) tried to convince economists to take his Grand Theme of bounded rationality seriously (henceforth, “BR”). His examples of bounded rationality and theirimplications quite often involved the business firm. Indeed, he sometimes took the notion of “administrative man” to be synonymous with a boundedly rational agent. Of course, Simon himself published prolifically on firms and other organizations (e.g., Simon, 1949, 1951, 1991; March and Simon, 1958). Given all this, it is surprising that – so I shall argue – economists of organizations have made little use of the notion of BR, and that the arguably most successful contemporary economics research that explicitly builds on BR takes place in fields such as behavioral finance and behavioral law and economics. In the following, I argue that BR is, in contrast to the impression often conveyed (e.g., by Augier, Kreiner and March, 2000), not used in an essential way in the modern economics of organization; it is very much a background assumption that is introduced to help explaining other, more central, insights and concepts (e.g., contractual incompleteness and organizational routines).
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(with Jens Frøslev Christensen) ”Corporate Coherence: a Market Process Approach,” , Managerial and Decision Economics 22: 213-226.
We address the notion of corporate coherence recently made prominent by Teece et al. (1994. Understanding corporate coherence: theory and evidence. Journal of Economic Behavior and Organization 23 : 1-30). We argue that the literature is confused on the meaning of this notion (and similar notions) along a number of dimensions. Drawing on insights from market-process theories, we propose a dynamic understanding of corporate coherence, an understanding that involves the corporate capacity to strike a favorable balance between the production and exploitation of new knowledge. This argument is elaborated drawing on Austrian economics, evolutionary economics, and post-Marshallian economics.
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”Misesian Ownership and Coasian Authority in Hayekian Settings: The Case of the Knowledge Economy,” Quarterly Journal of Austrian Economics 4: 3-24. Spanish version in Libertas 2003.
The present article is taken up with the dynamics of economic organization. In particular, it critically discusses much recent work which has asserted that economic organization—notably, the boundaries of firms, internal organization, and corporate governance—will undergo major transformative changes as a result of the emergence of the so-called “knowledge economy,” a term much fancied by business administration and management scholars (Prusak 1997; Neef 1998). An Austrian perspective is a particularly fitting starting point for such an exercise. Surely, Austrian economists— who have always been occupied with analyzing the discovery, dispersion, and use of knowledge—will not be surprised to learn that we live in a knowledge economy. To Austrians, all economies are, in a broad sense, “knowledge economies.” This calls for clarification of the concept. However, like its (somewhat overlapping, but nonidentical) “new economy” counterpart in economics, the knowledge economy notion covers many different phenomena, 1 and as in the case of the new economy, the evidence for these phenomena is somewhat scant, perhaps contrary to the impression provided by the considerable media (and some academic) hype.
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2000
(with Tom Elfring) ”Competence Building: Understanding the Role of Internal Venturing and Spin-Offs,” Advances in Applied Business Strategy 6: 97-119 .
(no abstract available)
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(with Kirsten Foss) ”Theoretical Isolation in Contract Economics,” , Journal of Economic Methodology 7: 313-339.
We discuss contract theory from a combined Austrian/new institutional view. In the latter view, the world is seen as shot through with ignorance and transaction costs, but, as a tendency, entrepreneurial activity responds to the problems caused by these. All modelling must critically reflect this. This ontological commitment is contrasted to various isolations characteristic of contract theory, specifically the modelling strategy of introducing often ad hoc and unexplained constraints that suppress margins and possibilities of entrepreneurial actions that would be open to real-world decision-makers. We illustrate this by means of, for example, the treatment of asymmetric information under complete contracting and the notion of control rights under incomplete contracting.
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(with Kirsten Foss) ”Learning in Firms: Knowledge-Based and Property Rights Perspectives,”, European Journal of Social and Economic Systems 14: 119-142.
Proponents of the knowledge-based approach to the firm argue that organizational economics put all the burden on the allocation of incentives and property rights in the explanation of organizational phenomena, and neglects firm-specific knowledge and processes of learning. We argue that there is no inherent reason why organizational economics should be cut off from treating learning and exploring its organizational implications. More specifically, we demonstrate that it is possible to adopt an approach to learning that is consistent with rational choice methodology and stresses economizing, puts the emphasis on learning as a means of realizing efficiencies, is micro-analytic, and contains implications for economic organization. We concentrate on the role of experimentation as a means of finding solutions to coordination problems in complex production systems (e.g., finding the optimal sequence of activities) and the transaction costs learning-by-experimenting may create. Such transaction costs help determine the existence, boundaries and internal organization of the firm, and has implications for the understanding of competitive advantage.
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”The Dangers and Attractions of Eclecticism,” Journal of Macromarketing 20: 65-67.
Shelby Hunt’s A General Theory of Competition: Resources, Competences, Productivity, Economic Growth is an extremely ambitious and challenging work. It attempts to construct a theory of competition, called resource-advantage theory, by collecting insights from diverse perspectives in economics and business administration. However, there is little reflection in the book with respect to how theories should be combined in the concrete, and resource-advantage theory does not seem to lead to results that are not contained in one or more of its constituent theories. Although Hunt’s work suffers from excessive eclecticism, it is an admirable starting point for further research.
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”Austrian Economics and Game Theory: An Evaluation and a Stocktaking,” Review of Austrian Economics 13: 41-58.
I discuss the merits and drawbacks of game theory in economics from the perspective of Austrian economics. I begin by arguing that Austrians have neglected game theory at their peril, and then suggest that game theoretic reasoning could be one way of modelling key Austrian insights. However, admittedly some aspects of game theory don''t square easily with Austrian economics. Moreover, a major stumbling block for an Austrian acceptance of game theory may lie in the traditional Austrian resistance to formal methods.
1999
“Research in the Strategic Theory of the Firm: “Integrationism” and “Isolationism”, Journal of Management Studies 36: 725-755 (November).
It has been increasingly often argued that strategy research should aim for a 'strategic theory of the firm', that is, a theory explains the existence, boundaries, organization and competitive advantage of the firm within a unified theoretical framework. This paper discusses two archetypal strategies in research in the strategic theory of the firm, namely 'isolationism' and 'integrationism'. While the former is representative of the positions that either the knowledge-based view or the modern economics of organization can develop into full-blown strategic theories of the firm, the integrationist strategy stresses that progress is more likely to emerge from a combination of insights and research procedures from both the knowledge-based view and the modern economics of organization. The paper argues in favour of integrationism. In addition, the paper presents some novel criticisms of both the knowledge-based view and the modern economics of organization.
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”The Use of Knowledge in Firms”, Journal of Institutional and Theoretical Economics 155: 458-486.
Reprinted in Sandye Gloria-Palermo, Peter Boettke and Stephan Boehm, Modern Austrian Economics, London: Pickering and Chatto, 2002).
Austrian economics allows us to identify a number of weak spots in the modern economics of organization that all relate to the treatment of knowledge. Specifically, this body of theory is open to the same kind of objections that HAYEK [1937, 1945] raised against economics, namely that it does not incorporate truly dispersed knowledge, and therefore significantly understates the nature and severity of the coordination problems that confront social systems. However, rather than rejecting the modern economics of organization and opting for an alternative research program, this paper suggests that a combined research effort may be worthwhile.
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”Edith Penrose, Economics, and Strategic Management,” Perspectives in Political Economy 18: 87-104.
Reprinted in Christos Pitelis, ed. 2001. The Growth of the Firm: The Legacy of Edith Penrose. Oxford: Oxford University Press).
(abstract not available)
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“The Challenge of Business Systems and the Challenge to Business Systems”, International Studies of Management and Organization 29: 9-24.
As the title indicates, this article discusses two connected issues that are, however, of different scope and are accordingly discussed separately. Thus, in the first instance this article offers a review and discussion of the business-systems perspective. The discussion concentrates on the challenge to the business-systems perspective from economics. This in turn leads into the opposite challenge, namely, the challenge of the business-systems perspective to economics, which finally leads into a broad consideration of the links and differences between economics and sociology as these relate to the study of organization. This design has been suggested by the following observations.
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”Perspectives on Business Systems”, International Studies of Management and Organization 29: 3-8.
All of the contributions to this issue of International Studies of Management & Organization discuss various aspects of a new and largely sociological approach to the study of economic organization, namely, the business-systems perspective. This framework has been designed to compare and contrast the different ways of organizing economic activities that have become established in different institutional contexts, typically in different nations. The pioneering work here is that of British sociologist Richard Whitley (1992a), who coined the concept of business systems. Whitley's work is truly magisterial and has become increasingly influential lately, particularly in Europe,(1) as an approach to understanding, first, the "stamp" in terms of the modes of organizing and managing that belonging to a certain country leaves on firms, and second, how firms interact and compete.
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(with Richard N. Langlois)“Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization” (. KYKLOS 52: 201-218. Reprinted in Richard N Langlois, Tony Fu-Lai Yu and Paul L Robertson, eds., Alternative Theories of the Firm, Cheltenham: Edward Elgar, 2003; John C. Wood and Michael C. Wood, eds. Alfred Chandler: Critical Evaluations, London: Routledge. 2007).
This paper argues that, since Coase's seminal 1937 paper on `The Nature of the Firm', the economics of organization has focused too exclusively on issues of incentive alignment abd has ignored issues of imperfect knowledge in production. However, there is now emerging an approach to economic organization - which we call `the capabilities approach'- that places production center-stage in the explanation of economic organization. We argue that the capibilities approach complements incentive-based theory (1) by considering the problems of oimperfect knowledge in production as well as in governance and (2) by considering issues not only of incentive alignment but also of qualitative coordination among holders of specialized, distributed, and often tacit knowledge.
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(with Torben Pedersen and Mats Forsgren) “Accounting for the Strengths of MNC Subsidiaries: The Case of Foreign-Owned Firms in Denmark”, International Business Review 8: 181-196.
This paper links up with recent work on the role of subsidiaries in multinational corporations as well as with recent work in the strategy and business network literature. We discuss the sources of organizational strengths of subsidiaries in the larger multinational corporation, and argue that organizational strength can to some extent be proxied by strength in the market place. Based on analysis of data on foreign-owned production firms in Denmark, we test three hypotheses: 1) that internal factors (capabilities, patents....) are positively related to the organizational strengths of MNC subsidiaries, 2) business network factors (network relations) are positively related to the organizational strengths of MNC subsidiaries, and 3) there is an interaction effect between internal factors and business network factors when explaining the organizational strengths of MNC subsidiaries. Hypothesis 1 but not Hypothesis 2 is supported. But the testing also supports Hypothesis 3, that is there seems to be an interaction effect between the two factors.
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“Edith Penrose and the Penrosians - Or, Why There is Still so Much to Learn From The Theory of the Growth of the Firm”, Economies et Sociétés 29: 143-164.
It is a commonplace that the great works of social science have been subject to a number of rivalrous interpretations. Thus, in economics, one often sees a received, and typically neoclassical, interpretation being up for attack from the perspective of heterodox interpretations (and I shall follow this established practice in the present paper). This is the case of the works of, notably, Marshall, and Keynes. Experts in hermeneutics may lecture us at length about the reasons why the great works are interpreted differently, and about the perplexities of textual interpretation. For example, when considering alternative interpretations, a basic dilemma is that what the “facts” of the text mean and their significance in the context of the whole text, is dependent upon their interpretation, so that there really is no external, “objective” arbiter outside of the interpretive schema for purposes of arbitration. Of course, this does not mean that we cannot engage in a reasoned discussion of the merits of alternative interpretations (Popper 1994); merely that there is no interpretation- independent standards that we may appeal to.
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“Networks, Capabilities, and Competitive Advantage”, Scandinavian Journal of Management 155: 1-15.
This conceptual paper joins network theories of firm interaction with the recent resource-based perspective in strategic management. This suggests a more satisfactory underpinning for the analysis of competitive advantage within the network approach. In other words, application of the resource-based approach suggests one way to uncover the sources of competitive advantage of the network firm. The paper also makes the related point that network theorists stand to benefit from the Marshallian tradition in industrial economics, a point that has sometimes been made by network theorists, but has never or seldom been elaborated.
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”Pandoras æske, sorte æsker og den økonomiske virksomhedsteori”, Nordiske Organisationsstudier 1:3-31.
(no abstract available)
1998
“The New Growth Theory: Some Intellectual Growth Accounting”, Journal of Economic Methodology 5: 223-246.
This paper discusses the reasons for the success of the new growth theory. Given that the NGT does not appear to say much new about empirical reality, that its essential ideas have been known for a long time, and that it does not really make contact with a large literature on institutions and economic change, its strong success may arguably be seen as surprising. Or, at least, its success may appear peculiar to Lakatosian methodologists, and others who emphasize notions such as 'novel facts'. The reason for the success of the NGT is argued to lie in its constituting a case of strong heuristic progress: it brought growth through knowledge accumulation within the confines of neoclassical economics, and thus demonstrated the continued viability of this research tradition.
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“The Competence-Based Approach: Veblenian Ideas in the Modern Theory of the Firm”, Cambridge Journal of Economics 22: 479-496.
I argue that a contemporary stronghold of a number of Thorstein Veblen's crucial ideas can be found in the emerging competence-based approach to the firm (e.g., Penrose, Chandler, Winter). For example, the emphasis in this literature on firms as path-dependent entities characterised by their heterogeneous and group-based knowledge bases can be linked with key themes in Veblen's work. Thus, the paper presents the competence-based approach as a modern Veblenian approach. Moreover, the Veblenian aspects of the competence-based approach are also those aspects that most differentiate it from the other dominant economic approach to the firm, the contractual approach (e.g., Alchian and Demsetz, Williamson, Grossman and Hart). The aim of the paper is both to make this historical point and to present a contemporary body of theory that may with some justice be called Veblenian.
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“The Resource-Based Perspective: An Assessment and Diagnosis of Problems”, Scandinavian Journal of Management 14: 133-149.
The resource-based approach to strategy, which reaches back to the contributions of Penrose, Selznick and Chandler, has gradually become the dominant perspective in strategy (content) research, arguably because it combines realism with relative rigour. The present paper presents the main themes of the contemporary version of the resource-based perspective (Wernerfelt, Rumelt, Barney....) and diagnoses a number of problems, such as the lack of a clear terminology, unclarity as to what really is the unit of analysis, the role of the environment, and the seemingly different versions that exist of the perspective. The perhaps deepest problem, however, is the lack of theorizing with respect to the creation of new resources, which tends to give the perspective a retrospective character and makes its application to managerial practice. It is suggested that resource-based scholars may draw upon work relating to real options, complementarities and organizational learning if they wish to remedy this deficiency.
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(with Mikael Iversen) “Promoting Synergies in Multiproduct Firms”, Finnish Journal of Business 2: 135-158.
This article address the issue of how to pro-mote synergies in divisionalized, diversified firms from the perspectives of the resource-based view and recent work on corporate headquarters, thus connecting the analysis of sustained competitive advantage with organizational issues. The article suggests three questions for future research, namely 1): How should we theoretically understand synergies? 2): How, and by whom, are they promoted?, and 3): May we utilize insights developed under 1) and 2) when seeking a rationale for the existence and functions of the corporate headquarters? The article then
provides some tentative answers to these questions, arguing that the concept of complementarity is particularly likely to capture most meanings of synergy. Furthermore, it is proposed that the CHQ promotes synergies through four different influence activities, and that these activities provide the raison d'etre of the corporate headquarters by creating value unobtainable for specialized firms. The reasoning is illustrated with examples from Danish corporations, specifically Danfoss and Bang & Olufsen.
1997
“Evolutionary and Contractual Theories of the Firm: How do They Relate?”, Rivista Internazionale di Scienze Sociali 29: 63-91.
(no abstract available)
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Reprinted in Nicolai J Foss, ed. 2000. The Theory of the Firm: Critical Perspectives in Economic Organization. (4 vols.). London. Routledge.
(no abstract available)
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“Austrian Insights and the Theory of the Firm”, Advances in Austrian Economics 4: 175-198.
The theory of the firm, and more broadly of economic organization, has been one of the most rapidly expanding areas of research in economics in the last decade. It has also been one of the most prestigious to work in, and most of the younger, top theorists in mainstream economics have contributed to it. "A theory of the firm" is now generally understood as a theory that addresses at least one (and preferably all three) of the following issues (cf. Holmstr6m and Tirole 1989):
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“On the Rationales of Corporate Headquarters”, Industrial and Corporate Change 6: 313-339
This paper addresses the rationales of corporate headquarters (CHQ). In organizational economics, the role of the CHQ is mostly seen to be limited to monitoring and incentive issues. However, it has also long been recognized that the CHQ may assist in exploiting economies of scope and other synergies and in building up internal capital markets—that is to say, it may 'create the positive' rather than merely 'avoid the negative'. This paper links up with the 'positive' view of the CHQ, but expands substantially on it. Starting from the capabilities view of the firm, I suggest that an important part of the rationales of the CHQ lies in its ability to (i) perform 'knowledge-direction' (i.e. use, blend and direct the initial knowledge endowments of input owners) and (ii) exploit the flexibility of incomplete contracts, particularly with respect to growing capabilities through coordinated organizational learning. While these functions of the CHQ are recognized within the business history and strategy literature, they are neglected within the literature on organizational economics. The novelty of the paper lies in giving an economically oriented treatment of these value creating capabilities of the CHQ.
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“The Classical Theory of Production and the Capabilities View of the Firm”, Journal of Economic Studies 24: 307-323.
Makes the case that the classical theory of production, as developed primarily by Adam Smith, should be seen as a precursor of the modern capabilities view of the firm (Penrose, Richardson, Nelson and Winter, Teece, Langlois and others). Furthermore, based on an empiricist epistemology, Smith developed ideas that are close to modern notions such as routines and bounded rationality. Shows that his emphasis on knowledge, specialization and learning is characteristic of the capabilities view, but not of the contractual view. Discusses the intellectual link from Smith to other classicals, such as Babbage and Marx, to Marshall and such post-Marshallians as McGregor, Andrews, Downie, Penrose, and Richardson. Argues that the classical-capabilities view of the firm can be seen as a theory of firm boundaries. States that the make-or-buy decision may in fact hinge on production-cost considerations, contrary to the spirit of standard transaction-cost economics.
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“Ethics, Discovery, and Strategy”. Journal of Business Ethics 16: 1131-1142.
I address the issue of justifiable profits from distinct perspectives in economics, strategy research and ethics. Combining insights from Austrian economics, the resource-based perspective, and finders, keepers ethics, I argue that strategy is about the discovery of hitherto unexploited possibilities for exchange. To the extent that strategy is about the discovery/creation ex nihilo of products, ways of producing products, etc., the resulting profits are argued to be justifiable from a finders, keepers perspective.
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“Economics, Institutions, and Ludwig von Mises”. Cultural Dynamics 9: 77-96.
I argue that what made the Austrian School distinct from other economic traditions was not only a thoroughgoing subjectivism and a rationalistic methodology, but just as much an emphasis that real institutions should be approached using choice-theoretic tools. Using the work of Ludwig von Mises as the prime reference, I argue that the Austrians anticipated a number of the concerns of contemporary neo-institutionalists, particularly work on property rights. However, with respect to the institution theme, Mises was much more than simply a precursor; he suggested blending institutional and process analysis in a way that is still to be achieved by modern neo-institutionalists.
1996
“More Critical Comments on Knowledge-Based Theories of the firm”. Organization Science 7: 519-523.
This paper continues the critique of knowledge-based theories of the firm that was undertaken in Foss (Foss, N. J. 1996a. Knowledge-based approaches to the theory of the firm: Some critical comments. Organ. Sci. 7(5) 470–476.), specifically criticizing the reasoning in Kogut and Zander (Kogut, B., U. Zander. 1996. What firms do? Coordination, identity, and learning. Organ. Sci. 7(5) 502–518.) and Conner and Prahalad (Conner, K. R., C. K. Prahalad. 1996. A resource-based theory of the firm: Knowledge versus opportunism. Organ. Sci. 7(5) 477–501.). I argue that Kogut and Zander (Kogut, B., U. Zander. 1996. What firms do? Coordination, identity, and learning. Organ. Sci. 7(5) 502–518.) attempt to explain firm organization in terms of a preference for such organization—a distinctly non-economic mode of explanation—and that Conner and Prahalad fail to sufficiently characterize the nature of the firm, because they identify firm organization with the employment contract and neglect asset-ownership.
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“Knowledge-Based Approaches to the Theory of the Firm: Some Critical Comments”. Organization Science 7: 470-476.
It is argued that Kogut and Zander (Kogut, B., U. Zander. 1992. Knowledge of the firm, combinative capabilities, and the replication of technology. Organ. Sci. 3 383–397.) and Conner (Conner, K. R. 1991. A historical comparison of resource-based theory and five schools of thought within industrial organization economics: Do we have a new theory of the firm? J. Management 17 121–154.) erred in the specific way in which they claimed that a distinct theory of the multi-person firm can be constructed on the basis of a theory of organizational knowledge or from resource-based insights. It is not possible to tell very much of a story about why there should be firms in lieu of notions such as "opportunism" or "moral hazard." However, properly interpreted, knowledge-based theories may help shed light on issues relating to the boundaries and internal organization of the firm.
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“Strategy, Economics, and Michael Porter”. Journal of Management Studies 33: 1-24. Reprinted in David Faulkner, ed. Strategy: Critical Perspectives, London: Routledge, forthcoming).
To be reprinted in a volume on Michael Porter, edited by Hiro Isuzhi and Robert Huggins.
This article links up with recent discussions of the strategy/economics nexus. In contrast to most of the proponents and opponents of economics in strategy thinking, a balanced pluralist perspective is adopted. According to this, a discipline should strike a balance between the generation of new theoretical alternatives and the selection among them. Applying this general idea, I argue that the strategy field is too pluralistic, and that the unfortunate consequences of excessive pluralism and eclecticism may be remedied by economics playing a larger role in the conversation of strategy researchers. This does not necessarily mean standard neoclassical economics or new industrial organization economics; evolutionary economics, for example, is a serious contender, too. the evolution of Michael Porter's thinking is used as a case for demonstrating some of the advantages and some of the dangers of economics in the strategy field, and for illustrating points about eclecticism and pluralism.
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“Harold Malmgren's Analysis of the Firm: Lessons for Modern Theorists?”. Review of Political Economy 8: 349-366.
This paper analyses Harald B. Malmgren's neglected 1961 paper 'Information, expectations, and the theory of the firm', which provided the first extensive elaboration of Coase's 1937 analysis in 'The nature of the firm'. Malmgren's primary sources of inspiration were Coase, Hayek, Richardson and Penrose. Combining these sources in a creative way allowed Malmgren to anticipate themes that have only recently been addressed in the theory of economic organization. However, there is still much to be learned from Malmgren's discussion, particularly the way in which he combined contractual and knowledge-based approaches to the firm. Moreover, Malmgren suggested that it is possible to construct an opportunism-independent approach to economic organization.
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“Capabilities and the Theory of the Firm”, Revue d’Economie Industrielle 77: 7-28 Reprinted in Richard N Langlois, Tony Fu-Lai Yu and Paul L Robertson, eds., Alternative Theories of the Firm, Cheltenham: Edward Elgar).
The recent decade has witnessed a strong expansion of work on the firm, both from a capabilities perspective and from a contractual perspective. These two bodies of theories are often thought to be fundamentally different, because their domains of applications are different (knowledge-accumulation vs contracts and incentives). However, we need to integrate propositions from capabilities perspectives with ideas about economic organization (markets, hybrids, firms). This is because only a more unified theory will allow us to understand such issues as the dynamics of the modern corporation, and, more topically, the costs and benefits of outsourcing. I discuss the relations between these two bodies of theories. It is possible to argue in favor of a relation of complementarity between the two and pursue a research strategy on this basis. However, it is also possible two claim that they are rivals. Along this line, it is argued that the capabilities perspective contains propositions about economic organization that are not to be found within the modern Coasian approach to economic organization, and thus may be seen as a distinct emerging perspective on economic organization.
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“Higher-Order Industrial Capabilities and Competitive Advantage”. Industry and Innovation 3: 1-20.
This paper makes some analytical suggestions to help explain the advantages that firms derive from clustering or networking. The concept of 'higher-order capabilities' is introduced to identify the assets which may give firms in such clusters or networks some competitive advantages over firms that are not members of such clusters. Higher-order capabilities are non-traded interdependencies among firms, and may be approached in terms of the resource-based view of recent strategic thinking.
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(with Carsten A. Koch) “Opportunism, Organizational Economics, and the Network Approach” Scandinavian Journal of Management 12: 189-205.
This article discusses the concept of opportunism, familiar from Williamsonian transaction cost economics, and its role in business studies. Various arguments for the importance and centrality of the concept are presented. The transaction cost framework is compared to the Swedish network approach. Specifically, opportunistic behavior seems to be implicitly present in the claims of network theory. The overall conclusion is that many network arguments are not in substantial conflict with transaction cost economics. And by joining forces, the approaches may provide a more comprehensive and dynamic theory of economic relationships. A number of new arguments are brought to bear on these issues.
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“Firms, Incomplete Contracts, and Organizational Learning”. Human Systems Management 15: 17-26.
Argues that organizations can adapt to unforeseen contingencies if they accept that all contingencies cannot be covered by a contract, and that incomplete contracts are a necessary feature of a sound economic approach to the organization. Believes that organizations can deal with the uncertainty that this involves by seeing these incomplete contracts as being structures for problem solving. Links the need for effective problem solving to the use of knowledge within the organization and the development of organizational learning. Concludes that the incompleteness of contracts is not a problem but a virtue, allowing the firm to function as an adaptive cognitive system.
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“The “Alternative” Theories of Knight and Coase, and the Modern Theory of the Firm”. Journal of the History of Economic Thought, vol. 18, no.1, pp. 76-95
In his contribution to the 1987 conference that celebrated the fiftieth anniversary of Ronald Coase's “The Nature of the Firm” (1937), Harold Demsetz noted that from the birth of modern economics to 1970, “only two works seem to have been written about the theory of the firm that have altered the perspectives of the profession: Knight's Risk, Uncertainty, and Profit (1921) and Coase's ‘The Nature of the Firm’” (Demsetz 1993, in Williamson and Winter 1993, p. 159). It is easy to feel uncomfortable with this observation. First, Coase's article was ignored for decades. Second, Knight's book did not receive much attention because of its theory of economic organization, but because of its statement of the theory of perfect competition (Stigler 1957; Machovec 1995), its distinction between risk and uncertainty, and its theory of profits (see, e.g., Boulding 1942 and Papandreou 1952).'
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“Post-Marshallian and Austrian Economics: Towards a Fruitful Liaison? Advances in Austrian Economics 3: 213-221.
(No abstract available)
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“Spontaneous Social Order: Economics and Schützian Sociology”. American Journal of Economics and Sociology 55: 73-86.
This paper relates to the emerging economics/sociology-nexus, in arguing that economists may have a lesson to learn from the work of the sociologist Alfred Schütz. The problem of coordination, which is the problem of theoretically demonstrating the possibility of spontaneous order in society, is discussed. While conventional economics and classical game-theory have not solved or even convincingly addressed this problem, it is explicitly addressed by Austrian and neo-institutional economics. It is argued that these two traditions in some important aspects dovetail with Schützian insights, in that the Schützian analysis of the structures of the life-world contains a number of pertinent insights into the coordination problem.
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“The Coordination of Investments in a Market Economy: Comments on a Revitalized Marxian Theme”. Studies in Political Economy 49: 149-161.
(no abstract available)
1995
“Types of Price Theory”. Rivista Internazionale di Scienze Sociali 53: 253-276.
(no abstract available)
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“More on “Hayek's Transformation”. History of Political Economy 27 (2): 345-364.
(no abstract available)
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“Information and the Market Economy: A Note on a Common Marxist Fallacy”. Review of Austrian Economics 8: 127-134.
(no abstract available)
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“The Economic Thought of an Austrian Marshallian: George Barclay Richardson”. Journal of Economic Studies 22: 23-44.
Discusses the economic contributions of George Barclay Richardson. Detailing the Austrian and Marshallian aspects of his work, argues that all his contributions – on industrial organization, welfare economics, history of thought, etc. – are united in their concern with the co-ordination problem, that is, the problem of theoretically demonstrating how order may be achieved in decentralized market economies. Furthermore, argues that Richardson's work from 1953 to 1972 in the answers it gave to this problem anticipated a number of themes that have only recently acquired prominence in economic theory, specifically in neo-institutionalist thought. The pioneering originality of his work also partly accounts for the relative neglect with which it was originally received.
1994
“Cooperation is Competition: George Richardson on Coordination and Interfirm Arrangements”. British Review of Economic Issues 16: 25-49.
(no abstract available)
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“The Biological Analogy and the Theory of the Firm,” Journal of Economic Issues 18: 1115-1136
Reprinted in Geoff Hodgson, ed. The Foundations of Evolutionary Economics, Aldershot: Edward Elgar, 1998.
Although the application of analogies from biological evolutionary thought to economics is an old pastime, it is well known that economists were among the early sources of inspiration for the emerging theory of natural selection. Charles Darwin is said to have been strongly inspired by the work of Thomas Malthus on population as well as by the broadly evolutionary theorizing of the Scottish Enlightment [Schweber 1977; Jones 1980; Jones 1989]. Given this, one would perhaps have expected economists to enthusiastically adopt results from evolutionary biology and to endorse evolutionary modes of thought. However, in the mainstream tradition - on almost any level - one seeks in vain for anything that can properly be said to constitute an evolutionary model.
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“Why Transaction Cost Economics Needs Evolutionary Economics”. Revue d'Economie Industrielle No. 68: 7-26
L'article propose de combiner les théories néo-institutionalistes du type coûts de transaction avec les théories évolutionnistes des marchés et organisations de manière à obtenir un néo-institutionalisme dynamique. L'argumentation s'appuie sur l'existence d'un certain nombre de réalités qui ne peuvent être expliquées de manière satisfaisante que pour une telle théorie, en insistant sur la nécessité de changement dans le néo-institutionalisme. Une sorte de programme minimum pour une théorie néo-institutionaliste dynamique est ensuite présentée.
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“Realism and Evolutionary Economics”. Journal of Social and Biological Systems 17 (1) 21-40.
This article provides a discussion of the foundational aspects of evolutionary economics. Using the framework developed by British realist philosopher Roy Bhaskar, I argue that what sets evolutionary economics apart from neoclassical economics is fundamentally a difference that may best be called “ontological.” Whereas evolutionary economics theorizes on the basis of an economic universe that is open, in the sense that the emergence of novelties is allowed, neoclassical economics suppresses novelty. Employing Bhaskarian concepts such as “powers,” “generative mechanism,” and “closure,” I identify further differences—in the domains of explanatory approach, for example, and trace them to the underlying ontological difference.
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“The Two Coasian Traditions”. Review of Political Economy 6: 35-61
Starting from the observation that the modern theory of the firm is branching out in at least two directions, this article argues that the existing differences lie in their underlying ontology. On the basis of the discussion of Bhaskar (1978) it is argued that underneath the neoclassical 'nexus of contracts'- approach to the firm is an ontology that differs from that of the more heterodox Williamsonian transaction-cost economics. From the difference in terms of ontology flows differences in terms of conceptualizations of behaviour, mode of explanation etc. It is furthermore argued that the historical root of these differences is traceable is Coase's 1937-paper, 'The nature of the firm'.
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“The Theory of the Firm: The Austrians as Precursors and Critics of Contemporary Theory”. Review of Austrian Economics 7 (1): 31-65. Published in Spanish in Libertas 1997).
More than one commentator has observed that a distinct theory of the firm is conspicuously missing from the main body of Austrian economics (e.g., Langlois 1991, p. 2; Minkler 1991, p. 8). As two Austrian economists observed some years ago: "there is no subjectivist or Austrian theory of the firm" (O'Dris- coll and Rizzo 1985, p. 123). That is still the situation. With the term "theory of the firm," I shall set forth a theory that has something to say about the existence, the boundaries and the internal organization of the institution known as the business firm. And with the term "firm," I shall describe an organization that is planned with the express purpose of earning profit. In Hayekian terms (Hayek 1973), the firm is a "planned order," an aspect of "taxis." That social institutions have always occupied center stage in Austrian economics is a proposition that commands widespread agreement today (Hodgson 1988; Langlois 1986,1991). Many econo- mists recognize the distinctiveness of, for example, the Mengerian theory of the origin of a medium of exchange (Menger 1871, chap. 8), and probably even more economists are familiar with the Hayekian account of the information providing function of the price system (Hayek 1945).
1993
“Notes on the Socialist Calculation Debate”. Rivista inter¬nazionale di Scienze sociali 51: 147-168.
(no abstract available)
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“More on Knight and the Theory of the Firm”. Managerial and Decision Economics 14: 269-276.
This article argues that Boudreaux and Holcombe (1989) misrepresented at least some contemporary theories of the firm when they claimed that these theories were constructed on a rigid general equilibrium basis, and contrasted them unfavorably with Frank Knight's theory of the firm. While nexus of contract theories may partially fit this description, this is not the case with the theorizing represented by the work of Oliver Williamson. Boudreaux and Holcombe are also criticized for failing to see that Knight's theory of the firm is in fact consistent with much contemporary theorizing on the firm.
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“Theories of the Firm: Contractual and Competence Perspectives” (1993). Journal of Evolutionary Economics 3 (2): 127-144. Reprinted in Nicolai J Foss, ed. 2000. The Theory of the Firm: Critical Perspectives in Economic Organization. (4 vols.). London. Routledge. Martin Ricketts, ed. The Economics of Modern Business Enterprise, 3 Vols. Cheltenham: Edward Elgar, 2007.
The article compares alternative approaches to the theory of the firm. The two main approaches confronted are the contractual (Coasian) perspective and the competence (evolutionary) perspective. Whereas the firm as a repository of tacit knowledge is neglected in the contractual perspectives, it occupies center stage in the competence perspective. It is argued that the competence perspective is not only applicable an understanding of the sources of firms' competitive advantage, but may also be applied to the issues of the existence and the boundaries of the firm. This means that a distinct theory of the firm can be constructed on the basis of evolutionary theory.
1991
“The Suppression of Evolutionary Approaches in Economics: The Case of Marshall and Monopolistic Competition”. Methodus 3: 65-72. (December 1991).
Reprinted in Geoff Hodgson (ed.) (1995) : Economics and Biology. Aldershot: Edward Elgar).
(no abstract available), but paper can be retrieved from the link above.