Firms, Organizations and Contracts: A Reader in Industrial Organization

By Peter J. Buckley; Jonathan Michie | Go to book overview

3 The Organization of Industry

G. B. Richardson


I

I was once in the habit of telling pupils that firms might be envisaged as islands of planned co-ordination in a sea of market relations. This now seems to me a highly misleading account of the way in which industry is in fact organized. The underlying idea, of course, was of the existence of two ways in which economic activity could be co-ordinated, the one, conscious planning, holding sway within firms, the other, the price mechanism, operating spontaneously on the relations between firms and between firms and their customers. The theory of the firm, I argued, had as its central core an elaboration of the logic of this conscious planning; the theory of markets analysed the working of the price mechanism under a variety of alternative structural arrangements.

I imagine that this account of things might be acceptable, as a harmless first approximation, to a large number of economists. And yet there are two aspects of it that should trouble us. In the first place it raise a question, properly central to any theory of economic organization, which it does not answer; and secondly, it ignores the existence of a whole species of industrial activity which, on the face of it, is relevant to the manner in which co- ordination is achieved. Let us deal with each of these matters in turn.

Our simple picture of the capitalist economy was in terms of a division of labour between the firm and the market, between co-ordination that is planned and co-ordination that is spontaneous. But what then is the principle

____________________
I am grateful to Mr J. F. Wright, Mr L. Hannah and Mr J. A. Kay, each of whom gave helpful comments on a draft of this article.

-59-

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Firms, Organizations and Contracts: A Reader in Industrial Organization
Table of contents

Table of contents

  • Title Page iii
  • Preface and Acknowledgements v
  • Acknowledgements vi
  • Contents viii
  • List of Contributors xi
  • Foreword xiii
  • Introduction and Overview 1
  • Notes 18
  • References 20
  • I. THEORY OF THE FIRM 21
  • 1: The Equilibrium of the Firm 23
  • 2: The Nature of the Firm 40
  • 3: The Organization of Industry 59
  • 4: Production, Information Costs, and Economic Organization 75
  • Summary 95
  • Notes 96
  • References 102
  • 5: Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure 103
  • Conclusions 151
  • Notes 151
  • References 163
  • 6: Transaction-Cost Economics: The Governance of Contractual Relations 168
  • Conclusion 192
  • 7: An Economist's Perspective on the Theory of the Firm 199
  • Conclusion 212
  • Notes 212
  • II. MARKETS AND INDUSTRIAL ORGANIZATION 219
  • 8: Corporate Culture and Economic Theory 221
  • Introduction 221
  • Conclusion 261
  • Appendix 262
  • Appendix 271
  • Appendix 273
  • References 274
  • 9: Co-operative Agreements and the Organization of Industry 276
  • References 292
  • 10: Interpenetration of Organization and Market: Japan's Firm and Market in Comparison with the US 293
  • Conclusion 317
  • References 319
  • 11: Vertical Quasi-Integration 320
  • Conclusions 336
  • Notes 337
  • 12: Non-Contractual Relations In Business: A Preliminary Study 339
  • 13: Goodwill and the Spirit of Market Capitalism 359
  • III. JOINT VENTURES, NETWORKS, AND] CLANS 383
  • III. JOINT VENTURES, NETWORKS, AND] CLANS 385
  • References 407
  • 15: Joint Ventures 410
  • Conclusion 427
  • References 428
  • 16: Organizations: New Concepts for New Forms 429
  • Conclusion 440
  • Notes 441
  • 17: Markets, Bureaucracies, and Clans 442
  • References 456
  • Notes 459
  • References 473
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