Firms, Organizations and Contracts: A Reader in Industrial Organization

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

that information about the productive characteristics of a large set of specific inputs is now more cheaply available. Better recombinations or new uses of resources can be more efficiently ascertained than by the conventional search through the general market. In this sense inputs compete with each other within and via a firm rather than solely across markets as conventionally conceived. Emphasis on interfirm competition obscures intrafirm competition among inputs. Conceiving competition as the revelation and exchange of knowledge or information about qualities, potential uses of different inputs in different potential applications indicates that the firm is a device for enhancing competition among sets of input resources as well as a device for more efficiently rewarding the inputs. In contrast to markets and cities which can be viewed as publicly or nonowned market places, the firm can be considered a privately owned market; if so, we could consider the firm and the ordinary market as competing types of markets, competition between private proprietary markets and public or communal markets. Could it be that the market suffers from the defects of communal property rights in organizing and influencing uses of valuable resources?


Notes
1.
Meter means to measure and also to apportion. One can meter (measure) output and one can also meter (control) the output. We use the word to denote both; the context should indicate which.
2.
A producer's wealth would be reduced by the present capitalized value of the future income lost by loss of reputation. Reputation, i.e. credibility, is an asset, which is another way of saying that reliable information about expected performance is both a costly and a valuable good. For acts of God that interfere with contract performance, both parties have incentives to reach a settlement akin to that which would have been reached if such events had been covered by specific contingency clauses. The reason, again, is that a reputation for 'honest' dealings-- i.e. for actions similar to those that would probably have been reached had the contract provided this contingency--is wealth.

Almost every contract is open-ended in that many contingencies are uncovered. For example, if a fire delays production of a promised product by A to B, and if B contends that A had not fulfilled the contract, how is the dispute settled and what recompense, if any, does A grant to B? A person uninitiated in such questions may be surprised by the extent to which contracts permit either party to escape performance or to nullify the contract. In fact, it is hard to imagine any contract, which, when taken solely in terms of its stipulations, could not be evaded by

-96-

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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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