Firms, Organizations and Contracts: A Reader in Industrial Organization

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

observable ex post--A's randomization to determine whether to enforce punishment and B's randomization to determine whether to defect from strict adherence.) I conjecture as well that a very general proposition of this sort can be derived, but this will have to await another essay.


Postscript--1988

In the four or so years that have passed since I wrote "'Corporate Culture'", there has been a fair amount of energy devoted to some of the themes surveyed there. Even given the normal publication lag, it would be unfortunate not to pay some attention to those themes. At the same time, it is amusing to reread the last line of the introduction: 'readers will see that the final steps, while not accomplished, are not excessively difficult to traverse.' As some of those final steps are barely closer to fulfillment now than then, either I misestimated their difficulty or their inherent interest. I think the former is more likely to be true.

The one point at which, in rereading the chapter, I winced so hard that I felt compelled to signal that I would say something more is where I criticized Williamson for having little to say about the relative advantages and disadvantages of internal organization. (Hereafter, I will use his term and call it unified governance.) I would have profited enormously in writing this chapter from a close reading of Williamson ( 1985) and, especially in this instance, in reading chapter 6, on the inefficiencies of unified governance. To recast slightly what Williamson has to say there, when one moves from market governance to unified governance, one trades one set of inefficiencies for another, as the nature of what is exchanged changes. In market governance, a decision maker deals with others only to purchase the outputs derived from their labors. When we move to unified governance, the single decision maker can command the use of all the capital, but now that person must employ the labor services of those he or she earlier dealt with only for the output of their labor. The high-powered market-based incentives for labor are replaced by lower-powered internal incentives. Why are market-based incentives more high-powered? Williamson gives a number of specific reasons, many of which come down to the fact that it is hard in some cases to preserve ex post in internal organization the ex ante incentives that one has. To say more will take us too deeply into a whole new subject, except to say that Williamson ( 1985) answers my initial criticism rather substantially. Moreover, Williamson's more verbal theorizing on this point has been met by a number of more

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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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