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.

/pdf/the-iron-cage-revisited-institutional-isomorphism-and-xas5qn5nhy.pdf

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...

/pdf/social-capital-in-the-creation-of-human-capital-1836wo2872.pdf

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. **

/pdf/absorptive-capacity-a-new-perspective-on-learning-and-1n1c9gg9x0.pdf

Absorptive capacity: a new perspective on learning and innovation

https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=4862&context=penn_law_review

Symposium On Antitrust Law and Economics

/pdf/review-of-the-antitrust-paradox-a-policy-at-war-with-itself-16q8acz6je.pdf

Review of The Antitrust Paradox: A Policy at War with Itself by Robert H. Bork

15 SEPTEMBER 1918 * 9 MAY 2007 TO A STUDENT of the modern corporation with an interest in "managerial discretion" (which includes but goes beyond the corporate governance concerns posed by the separation of ownership and control), Alfred D. Chandler's book Strategy and Structure (1966) came as a bombshell. My dissertation, "The Economics of Discretionary Behavior: Managerial Objectives in a Theory of the Firm" (1963; published in 1964 with the same title), which had been inspired in part by William Baumol 's famous sales maximization hypothesis (1959), summarizes the literature on the modern corporation and sketches the research agenda that I then had in mind. That agenda underwent a major change after I read Chandler. Prior to my reading of Chandler, the need for the firm to observe a minimum profit constraint, together with competition in the product and capital markets, was the main control over managerial discretion that I had taken into account. Since many of the large firms that were of interest to Chandler (and to me) were operating in oligopolistic industries that afforded the firms with an appreciable degree of relief from product market competition, and since competition in the capital market (mainly proxy contests, since takeover by tender offer had yet to be perfected) was weak, it was my judgment (and that of many others) that large U.S. corporations typically enjoyed considerable latitude (sometimes referred to as "slack"). Strategy and Structure introduced a new control instrument: managerial discretion also varied with the organizational structure of the firm. This was a revolutionary concept, and I was reluctant to embrace it. Could it be that management was both the problem and the solution? This possibility certainly had to be entertained if, contrary to received microtheory, organization form mattered. The first step, which I had already taken, was to recognize that managerial discretion was problematic. The second step was to confront the latent lesson of Strategy and Structure: If organization form was a decision variable, then provision for that should thereafter be made in the theory of the modern corporation.1 As described and explained by Chandler, the multidivisional form was an "organizational innovation" (as devised by Alfred P. Sloan Jr., Donaldson Brown, Pierre du Pont, and others) that often served as a more effective check on managerial discretion than the earlier unitary (U-form) form of organization. Compared with the (U-form), in which strategic and operating decisions were joined, the multidivisional (M-form) structure worked out of a logic of organization in which operating and strategic decisions were separated (the logic being akin to that set out by W Ross Ashby in his 1960 book, Design for a Brain). The resulting decentralized structure was one in which the top management (the general office, as Chandler described it) had been removed from operating involvements and had been made responsible for strategic decision making and resource allocation within the firm, and the operating parts were organized as a series of quasi-autonomous divisions, each of which could be held accountable for its own net receipts. …

Alfred D. Chandler Jr

Antitrust law and economics

This book provides an insightful view of major issues in the economics of corporate governance (CG) and mergers. It presents a systematic update on the developments in the two fields during the last decade, as well as highlighting the neglected topics in CG research, such as the role of boards, CG and public interest and the relation of CG to mergers. Two important conclusions can be drawn from this book: the first is that corporate governance systems that better align shareholders’ and managers’ interests lead to better corporate performance; second, there is an important relationship between CG structures and the quality of firm decision-making, one of the most important being the decision to merge or take over another firm.

Oliver E. Williamson

Papers

Symposium On Antitrust Law and Economics

Review of The Antitrust Paradox: A Policy at War with Itself by Robert H. Bork

Alfred D. Chandler Jr

Antitrust law and economics

Corporate Boards of Directors: A Precautionary Perspective