Firms, Organizations and Contracts: A Reader in Industrial Organization

Firms, Organizations and Contracts: A Reader in Industrial Organization

Firms, Organizations and Contracts: A Reader in Industrial Organization

Firms, Organizations and Contracts: A Reader in Industrial Organization

Synopsis

What is a firm? Why do firms exist? How is production and administration best co-ordinated? What are the reasons for vertical integration? And disintegration? Is there a conflict between establishing and developing long-term relationships on the one hand, and the operation of free market competition on the other? Is there a choice between markets and hierarchies? What about networks and clans? These questions continue to be explored with economics, management, sociology and other related disciplines. Firms, Organizations and Contracts brings together the best inter-disciplinary analysis of the topic, and contains classic contributions and material not normally seen by those outside their own particular disciplines. It combines pioneer articles with more recent discussions of an area attracting growing attention amongst those studying industrial organization--whether on courses in economics, management, strategy, organization, law, or public administration. The volume includes Coase's initial enquiry into `The Nature of the Firm' and Ouchi's analysis of `Markets, bureaucracies and clans' Kaldor's questioning of `The Nature of the Firm' and Dore's discussion of `Goodwill and the spirit of market capitalism'. This book will be an invaluable tool for students in economics, management and sociology. In view of the growing use of contracts within the public sector, and within the private regulated sector, the book also sets out some of the key issues of concern to policy makers and public sector strategists.

Excerpt

The editors of The Economics of Contracts and Industrial Organization have put us in their debt by compiling an extremely valuable collection of articles on a subject the importance of which has only recently been recognized. However, work on it is now going on apace in many countries and the issue of this book of readings is therefore timely.

What is this new subject? Williamson called it 'the new institutional economics' or 'transaction cost economics' and its scope is well described by the title of this book. The articles in Part I, 'The Theory of the Firm', tell us about the origin and development of the ideas that were to produce 'transaction cost economics'. In my article 'The Nature of the Firm' (published in 1937) I introduced the concept of transaction costs and the dichotomy of co-ordination through the market and within the firm. For reasons that are not altogether clear to me, it was not until the 1970s and 1980s that the subject came alive again. What followed in those years was the very influential series of articles reprinted in Part I that carried the analysis well beyond my earlier formulation. Ambiguities were removed, errors corrected, new concepts introduced. The articles in Part II, Markets and Industrial Organization, and III, Joint Ventures, Networks, Clans and Alliances, carried the story forward. In them the focus is expanded and new questions are raised. The importance of such factors as reputation, the organization form, relationships outside contract and inter-firm agreements of various kinds, is demonstrated. These articles make clear that we have travelled far from a simple choice between the firm and the market, and that what we have to understand is the functioning of an intricate interrelated institutional structure about which we are extremely ignorant. Dispelling this ignorance will be an immense task, but, in carrying it out, the guidance provided by the articles in this book of readings will be of the greatest help.

Ronald Coase . . .

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