The Organisation of the Firm: International Business Perspectives

The Organisation of the Firm: International Business Perspectives

The Organisation of the Firm: International Business Perspectives

The Organisation of the Firm: International Business Perspectives

Synopsis

Aiming to unite two areas of research which have previously been seen as separate, these essays, by respected academics, address questions of the theory of the firm and international business.

Excerpt

Managers and other people bound up with the everyday world might be for-given for thinking that economic principles have little to say about the internal organisation of firms. Even textbooks of ‘managerial economics’, until very recently, would tend to describe firms in terms of sets of cost curves rather than in terms of organisational features. Having learned that average cost cannot be rising unless it falls short of marginal cost, aspiring business practitioners heave a sigh of relief and turn to more obviously ‘relevant’ concerns in the fields of marketing, organisational behaviour, or business strategy. This is regrettable because economic analysis has produced a powerful paradigm for analysing organisational structure and because the separation of the economic from the management literature leads to a proliferation of jargon which is unnecessary and confusing.

It was Ronald Coase (1937) who, in a celebrated paper, set out the elements of the modern economic approach to organisations. Coase studied firms in the United States in an attempt to understand what determined the scope of their operations. In the 1930s students were aware that some firms were ‘vertically integrated’ and others specialised in a particular part of the productive process. They also recognised that some firms produced a wide range of products while others kept within a very confined area. The problem was to find some explanation for these differing structures. Coase proposed a simple answer.

Transacting in markets and organisation within a firm are alternative methods of coordinating economic activity. Firms can choose whether to

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