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Theories of the Firm - or Frameworks ?

Theories of the Firm - or Frameworks ?. JC Spender ESADE & LUSEM. units of analysis & problematics. environment market. people (e.g. employee) things (e.g. resource, routine). organization / firm. boundary fit adapt change vitality manage. 1 st - organization as (social) system.

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Theories of the Firm - or Frameworks ?

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  1. Theories of the Firm - or Frameworks ? JC Spender ESADE & LUSEM

  2. units of analysis & problematics environment market people (e.g. employee) things (e.g. resource, routine) organization / firm boundary fit adapt change vitality manage ESADE seminar

  3. 1st - organization as (social) system • Herbert Spencer, Talcott Parsons, Chester Barnard • mechanism / servo-system • bio-system / organism / autopoietic / evolutionary • culture - meaning system / language-game • chaotic / complex / ordered system (Boisot) • system elements - inanimate stuff or people ? • methodological individualism • what model of the individual (MoI) ? • rational • something else ESADE seminar

  4. 2nd - non-systems - societies writ small ? society Natural Rights - freedom property gemeineschaft Natural Law - ethics, duty gesellschaft organization invisible hand & economic man * imperfections of two types John Locke ESADE seminar

  5. John Locke1632-1704 Michael Dahl, oil on canvas, 1696 ESADE seminar

  6. 3rd - theories of employment (Etzioni) coercive cultural calculative oath tyranny “employment” market nexus of contracts rational-expectations Coase - subordination what MoI to adopt? What does s/he do? principal-agent theory transaction cost - governance Barnard - executive contribution endogenous growth entrepreneurship Simon - docility ESADE seminar

  7. reprise - current theories of the firm (ToF) • bureaucracy • organism / self-organizing • culture • political system • CMS • psychic prison • flux • domination • resource dependence • new institutional theory • population ecology • principal-agent • transaction cost • team production, property rights • IO / 5-forces / RBV decomposable systems Simon (PAPS 1962) Penrose 1959 ESADE seminar

  8. imperfection / uncertainty • what do people actually do ? • mediate rationally between cause & effect • equilibrium or other theory • determinative • incompleteness - e.g. bounded rationality (emic/etic) • “uncertainty” (not risk) • ignorance • indeterminacy • incommensurability • apply judgment / imagination / agency • “open space” - ‘ba’ • framework - non-determinative judgment rationality reasoned practice ESADE seminar

  9. Barnard social physical personal executive function “organizational system” ESADE seminar

  10. Porter confidence level customers new entrants value chain / rent stream competitors substitutes suppliers evaluating mkt power industry - strategic group managerial choice ESADE seminar

  11. principal-agent Jensen & Meckling Mitnick, Fama, White managing - or - risk bearing risks distributed multiple periods - time-full multiple dimensions (financial and human capital) learning - emic imperfections risk management - etic imperfections ex-post & reputational measures - different etic imperfections trust non-determinative • agency costs • monitoring • bonding • residual loss • incentive design • single period - time-less • single dimension/resource • determinative • BUT - logical error ESADE seminar

  12. determined vs agentic action I2 independent & dependent variables primacy of analysis I1 I3 D managing causes to command & control effects D = f (I1-n) + ε C2 C1 interactive / under-determined open space action non-objective constraints primacy of Q = agency & experience C3 O = f (C1-n) * Q Schumpeter selecting field of action & put in motion ESADE seminar

  13. managing ? theory - positivist framework - constructivist managerial choice in-the-world milieu experienced constraints judging possibilities acting learning subjective • finding a theory • discovery of facts • analysis • rational choice • control • measurement • objective ESADE seminar

  14. ToF as Framework sole entrepreneur distributed agency what managers cannot do for themselves complexity Penrose ‘mgt team’ managing - the rhetorical shaping of others’ agentic action Balanced Scorecard strategic tools & discourse empirical research casework • factor Q • all one can say • theory of judgment ESADE seminar

  15. summary • do we have a theory of the firm ? • what is management ? • firm as engine of wealth creation • exogenous • endogenous • can we differentiate: • entrepreneurship • leadership • strategizing ESADE seminar

  16. ESADE seminar

  17. ESADE seminar

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