Knowledge, Scale and Transactions in the Theory of the Firm
Firms in market economies vary enormously in size, nature and competitiveness. In this important contribution to the literature on the theory of the firm, Mario Morroni provides a fresh analytical framework which improves our understanding of the causes of this diversity in organisational design and performance. The relations between internal and external basic conditions, decision-making mechanisms and organisational co-ordination are addressed, as are the circumstances in which capabilities, transactions and scale-scope considerations interact. With the emergence of the knowledge-based economy and the increasing pressure of global competition, the development of capabilities is acquiring ever greater importance in boosting competitiveness. Morroni shows that long-term relational agreements enhance learning processes and offer powerful tools for improving competitiveness in a context of conflicting interests, incomplete knowledge and uncertainty.
Table 12 Forecasting ability and uncertainty
of organ coordination
three aspects of organisational
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advantage analysis aspects of organisational asymmetric information behaviour bounded rationality business organisations capabilities characteristics cognitive rationality competitive complementarity complete contracts costly decision decision-making dimension of scale division of labour Dosi economies of scale efficiency Egidi employees enforcement example exchange favour firm firm’s growth heterogeneous Hodgson Holmstrošm implies incomplete forecasting increasing returns individual abilities indivisibility information and knowledge information-processing ability informational asymmetries innovative activity inputs instance interaction interest internal involves learning processes learning-by-doing linked Loasby managerial Marengo MeŽnard microeconomic Milgrom and Roberts moral hazard myopia operations opportunism optimisation organisational coordination outcomes ownership parties Penrose perfect rationality performance possible production elements production process production unit productive capacities radical uncertainty relational agreements relationship returns to scale role Rosenberg routines sequential aiming set-up process social specialisation structure suppliers tacit knowledge technical three aspects tion transaction cost economics transaction costs weak uncertainty Williamson