https://www.sfu.ca/~wainwrig/Econ400/jensen-meckling.pdf

Theory of the firm: Managerial behavior, agency costs and ownership structure

Firm Resources and Sustained Competitive Advantage

What makes organizations so similar? We contend that the engine of rationalization and bureaucratization has moved from the competitive marketplace to the state and the professions. Once a set of organizations emerges as a field, a paradox arises: rational actors make their organizations increasingly similar as they try to change them. We describe three isomorphic processes-coercive, mimetic, and normative—leading to this outcome. We then specify hypotheses about the impact of resource centralization and dependency, goal ambiguity and technical uncertainty, and professionalization and structuration on isomorphic change. Finally, we suggest implications for theories of organizations and social change.

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The iron cage revisited institutional isomorphism and collective rationality in organizational fields

In this paper, the concept of social capital is introduced and illustrated, its forms are described, the social structural conditions under which it arises are examined, and it is used in an analys...

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Social Capital in the Creation of Human Capital

In this paper, we argue that the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities. We label this capability a firm's absorptive capacity and suggest that it is largely a function of the firm's level of prior related knowledge. The discussion focuses first on the cognitive basis for an individual's absorptive capacity including, in particular, prior related knowledge and diversity of background. We then characterize the factors that influence absorptive capacity at the organizational level, how an organization's absorptive capacity differs from that of its individual members, and the role of diversity of expertise within an organization. We argue that the development of absorptive capacity, and, in turn, innovative performance are history- or path-dependent and argue how lack of investment in an area of expertise early on may foreclose the future development of a technical capability in that area. We formulate a model of firm investment in research and development (R&D), in which R&D contributes to a firm's absorptive capacity, and test predictions relating a firm's investment in R&D to the knowledge underlying technical change within an industry. Discussion focuses on the implications of absorptive capacity for the analysis of other related innovative activities, including basic research, the adoption and diffusion of innovations, and decisions to participate in cooperative R&D ventures. **

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Absorptive capacity: a new perspective on learning and innovation

Part 1 Background: the nature of the firm, R.H. Coase the vertical integration of production - market failure considerations, Oliver E. Williamson production, information costs, and economic organization, Armen A. Alchian, Harold Demsetz industrial organization - a proposal for research, R.H. Coase. Part 2 Apparatus: vertical integration, appropriable rents, and the competitive contracting process, Benjamin Klein et al comparative economic organization - the analysis of discrete structural alternatives, Oliver E. Williamson credible commitments - using hostages to support exchange, Oliver E. Williamson the limits of firms - incentive and bureaucratic features, Oliver E. Williamson the costs and benefits of ownership - a theory of vertical and lateral integration, Sanford J. Grossman, Oliver D. Hart multitask principal-agent analyses - incentive contracts, asset ownership, and the job design, Bengt Holmstrom, Paul Milgrom. Part 3 Applications: integration of the sales force - an empirical examination, Erin Anderson, David C. Schmittlein the costs of organization, Scott E. Masten et al contracts and specific investment - an empirical test of transaction cost theory, Bruce R. Lyons contract duration and relationship-specific investments - empirical evidence from coal markets, Paul L. Joskow quantity and price adjustment in long-term contracts - a case study of petroleum coke, Victor P, Goldberg, John R. Erickson efficient adaptation in long-term contracts - take-or-pay provisions for natural gas, Scott E. Masten, Keith J. Crocker the economics of block booking, Roy W. Kennedey, Benjamin Klein franchise bidding for natural monopolies -in general and with respect to CATV, Oliver E. Williamson regulation and administered contracts, Victor P. Goldberg the institutional foundations of regulatory commitment - a comparative analyses of telecommunications regulation, Brian Levy, Pablo T. Spiller the industrial organization of Congress - or, why legislatures, like Firs, are not organized as markets, Barry R. Weingast, William J. Marshall.

The Economics of Transaction Costs

Why are the ambitions of economic development practitioners and reformers so often disappointed? One answer is that development policymakers and reformers are congenital optimists. Another answer is that good plans are regularly defeated by those who occupy strategic positions. An intermediate answer is that institutions are important, yet are persistently neglected in the planning process. The article takes a bottom-up, microanalytical approach to economic development and reform. It examines the governance of contract, investment, and private ordering through the lens of transaction-cost economizing. And it assesses the efficacy of the de facto (as against the de jure) institutional environment with respect to credible commitments. In effect, institutional economists are cast in the role of archaeologists of economic reform and development - with the task of unpacking the lessons of the past to inform choices and programs for the future.

The Institutions and Governance of Economic Development and Reform

Gregory Dow's assessment of transaction cost economics is both thoughtful and provocative. Although we agree on many matters, these remarks focus on our differences. I begin with a brief sketch of the framework out of which transaction cost economics operates. I then examine the purported bias of transaction cost economics in favor of capital managed as against labor managed firms and my alleged failure to deal with ‘downward opportunism’. Dow's claim that transaction cost economics is given to functionalist excesses is considered next. Concluding remarks follow.

Transaction cost economics: The comparative contracting perspective

James Buchanan (2001 p. 29) avers that "mutuality of advantage from voluntary exchange is ... the most fundamental of all understandings in economics." He further contends that this fundamental understanding is better realized by examining economics through the lens of contract rather than the lens of choice (Buchanan, 1975). Because the latter has been the reigning paradigm in economics during the 20th century (Lionel Robbins, 1932; Melvin W. Reder, 1999), the lens of contract is (understandably) less fully developed. Interest in contractual approaches has nevertheless been building up, whence the gap between these two has been closing. This paper sketches some of these developments, with emphasis on private ordering.

The Lens of Contract: Private Ordering

Economics and organization theory were once alien fields. However, they have been drawn closer together as economics has broadened its outlook to include organization as an important economizing instrument and as organization theory has come to recognize the value of an economic perspective and approach. Thus, whereas these two fields used to talk past one another, the relation between them has become one in which each informs and is informed by the other. Transaction cost economics is a product of this intellectual synthesis and has helped to illuminate a large set of organizational phenomena that were once regarded as puzzles. The result has been better public policy and, at times, better business practice as well.

Oliver E. Williamson

Papers

The Economics of Transaction Costs

The Institutions and Governance of Economic Development and Reform

Transaction cost economics: The comparative contracting perspective

The Lens of Contract: Private Ordering

Economics and Organization: A Primer