Showing papers in "Industrial and Corporate Change in 1992"
TL;DR: In this paper, the authors place the boundaries of the firm and market within the context of the passage of time and place the insights of the chsical and Marshallian theories of organization.
Abstract: This paper attempts to place the theq of the boundaries of thejirm within the context of the passage of time. More precisely, it resurrects and places in a modem frame some of the insights of the chsical and Marshallian theories of organization. The modem reinterpretation of those theories centers around the 'capabilities' view of the jirm. Taken together with governance costs, the capabilities ofjirm and market determine the boundaries of the jirm in the short run. Ovw time, capabilities change as firms and markets learn, which implies a kind of information or knowledge cost-the cost of trandewing the firm's capability to the market w vice versa. These 'dynamic' governance costs are the costs of persuading, negotiating and coordinating with, and teaching others. They arise in the face of change, notably txchnological and organizational innovation. In fit, they are the costs of not having the capabilities you need when you need them. Dynamic transaction costs provide an explanation for vertical integration that is arguably more general than those dominant in the literature. In the face of uncertainty and divwgent views ofthe future, common ownership of multiple stages of production is a supwior institutional arrangement for coordinating systemic change. Asset-specrfity is neither necessary nor suffient for this to be true. Dynamic governance costs may also affIt internal organization. It may sometimes be costly-in 3 terms of persuasion, negotiation and teaching-to create within the firm capabilities _ readily available on the market. Indeed, in cases in which systemic coordination is not 4 the issue, the market may turn out to be the superior institution of coordination. In E 2 genwal, the capabilities view of the jirm suggests that we look atfim2 and market as alternative-and sometimes overlapping-institutions of learning. $ 1. Transaction costs in the long rzln and the short 9 X Classical and neoclassical perspectives
754 citations
TL;DR: In this article, a large comparative study of national innovation systems is described, and the authors describe what motivated the study and how it was organized and undertaken, and highlight some of the more interesting findings.
Abstract: In this essay I will describe a large comparative study of national innovation systems that was recently completed, tell something of what motivated the study and how it was organized and undertaken, and highlight some of the more interesting findings. This is a difficult task, for the project was not only large but also complex.
319 citations
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TL;DR: This article argued that the belief in the efficacy of the market for corporate control is inconsistent with the history of successful industrial development in the United States and abroad over the past century, and argued that value-creating investment strategies increasingly require that business organizations exercise control over, rather than be controlled by, the market-for-corporate control.
Abstract: What mode of corporate governance can best enable U.S. industrial enterprises to create value and contribute to national economic prosperity? During the 198Os, amid dramatic changes in the financial structures of major U.S. industrial corporations, many economists extolled the “value-creating” virtues of “the market for corporate control”-the exercise of control over the disposition of corporate assets and revenues by means of financial claims acquired through the medium of public securities markets. 1 A willingness to rely on the market for corporate control to determine the investment strategies of industrial corporations is consistent with the market-oriented ideology of mainstream economics. But, as I shall argue here, the belief in the efficacy of the market for corporate control is inconsistent with the history of successfu1 capitalist development in the United States and abroad over the past century.2 The history of successful capitalist development, marked by changing international industrial leadership, shows that value-creating investment strategies ).Increasingly require that business organizations exercise control over, rather than be controlled by, the market for corporate control. My arguments may be counterintuitive to economists trained to believe that superior economic performance is secured by market coordination rather than organizational (or planned) coordination of econonomic activity. For conventional economists, the “efficient” economy is one in which free markets in labor and capital permit the reallocation of factors of production to their “optimal” uses. From this perspective, any impediments to the “optimal" allocation of scarce resources to alternative uses--at any time and also over time as more efficient uses appear-are deemed to be "market imperfections.”
109 citations
91 citations
TL;DR: In this paper, two leading explanations are coordination of specialized efforts and control of opportunistic behavior, assuming that humans are boundedly rational, unable to process large amounts of information, to foresee all possible events, or to ferret out the facts known by others.
Abstract: What is the source of the value added by organization? Two leading explanations are coordination of specialized efforts and control of opportunistic behaviour. Both explanations assume that humans are boundedly rational — unable to process large amounts of information, to foresee all possible events, or to ferret out the facts known by others. In addition, control-of-opportunism theories (which have been dominant of late) assume that individuals are self-seeking and often dishonest. In models assuming opportunism, boundedness is invoked to establish the regime of action; within that regime, individuals behave coolly and strategically up to the limits of their ability, making no systematic errors. In these models, incentives, monitoring, and control procedures are seen as reducing the externality problems among individuals caused by cheating and shirking. In coordination models, organizational procedures are explained as necessary to reduce the probability that cooperating individuals will accidentally interfere with one another, leave vital tasks undone because they each expect someone else to perform them, or ignore information relevant to decisions. Both classes of explanation focus on the problems caused by the need for effective cooperation.
88 citations
TL;DR: The United States' experience in terms of organizational forms, strategies and control methods were reviewed in this article, where they were responses to specific business challenges, reflecting different national business, economic, political and cultural environments.
Abstract: My assignment is to review the United States’ experience in terms of organizational forms, strategies and control methods. Such organizational forms, strategies and control methods were responses to specific business challenges. As the papers that follow emphasize, responses to these challenges differed from nation to nation, reflecting different national business, economic, political and cultural environments.
56 citations
48 citations
TL;DR: In this paper, the authors studied the evolution of the large diversified firm and the internationalization of the firm across national borders in the first three-quarters of the 20th century.
Abstract: Did American development of the largest corporations in the world drive its dominance of world markets in the first three-quarters of this century? The evolution of the large diversified firm and the internationalization of the firm across national borders clearly rank as two of the most important economic developments in the twentieth century. To many, these two developments are linked. In the influential and seminal works of Chandler, the modern corporation arose to exploit fully the new technologies of transport and communication. In his most recent study Scale and Scope: The Dynamics of Industrial Capitalism (1990), Chandler develops the thesis that entrepreneurs gave way to the professional management of firms which succeeded in building, as first movers, three interrelated sets of investments: production, distribution, and management to achieve advantages of scale, scope, or both.
TL;DR: In this paper, the authors identify the economic functions with which financial institutions have been concerned, the central problems which they face, and the alternative ways by which those problems can and have been addressed.
Abstract: While bankers and businessmen have long recognized the importance of finance. financial constraints, and financial institutions, they have played a secondary role in neoclassical economic theory. This paper identifies the economic functions with which financial institutions have been concerned, the central problems which they face, and the alternative ways by which those problems can and have been addressed. The importance of limited liability and the legal environment is stressed. The final section explores the relationship between information-based finance constraints, the evolution of the firm, and the growth of the economy.