Tagged: Theory of the firm

Bonuses and organisational type - The Dismal Science

Paul Walker Mar 06, 2014

One of the amazing things about markets are the number of different organisational forms that appear as solutions to problems that people face. When it comes to business the most common form of organisation is the investor-owned firm. Another less common, but still widely seen, form of business organisation is the partnership in which the ownership rights are shared among … Read More

The why (or why not) of vertical integration - The Dismal Science

Paul Walker Aug 07, 2013

At the Latent Paradigm blog Seth Goldin asks Why would a firm choose vertical integration? Part of Goldin's answer reads, Why would a profit-maximizing firm choose vertical integration? Recall from Coase that firms exist to minimize transaction costs. If transaction costs between lessors and lessees are high enough, vertical integration is attractive. According to the widely … Read More

Kling on non-profits - The Dismal Science

Paul Walker Jul 26, 2013

Arnold Kling writes, James Piereson writes, For much of U.S. history, nonprofits have operated as a check on government by providing private avenues to serve the public interest. Unfortunately, American charities—and more broadly, the entire nonprofit sector—have become a creature of big government… The publication Giving USA, which tracks charitable spending, reports that the government now supplies one-third … Read More

Firms learning without markets - The Dismal Science

Paul Walker Jul 17, 2013

Being able to judge market signals and learn from what they are telling you is important for any firm operating within a market system. But what if your firm worked outside of a market system, Would it still have the skills to respond to market information? The answer appears to be no. A new NBER paper from Thomas Triebs and … Read More

The gravity of knowledge - The Dismal Science

Paul Walker Jun 14, 2013

Thanks to an email from Eric Crampton I have been alerted to a paper, with the title given above, by Wolfgang Keller and Stephen Ross Yeaple on the transfer of knowledge between countries. More precisely the transfer of knowledge between countries but within multinational companies. The paper appears in the American Economic Review, 2013, 103(4): 1414–1444, and the … Read More

How not to run a business: examples of poor SOE performance - The Dismal Science

Paul Walker May 28, 2013

In a previous posting I noted that By the late 1970s-early 1980s the sceptical minority was becoming larger, the mood was turning against government ownership [of firms] among both politicians and economists. One of the motivating forces for politicians and economists rethinking their position on state-owned enterprises was a history of under performance by these firms worldwide. Some … Read More