A New Theory of What? Humanizing the Firm in the Time of the Precariat JC Spender ESADE / LUSEM 27-June-11IESE 2nd Theory of the Firm Conference

complementary methods for examining ‘humanizing’ - ‘dignitizing’ - human work universal ethics - homogeneity conformance uniqueness - heterogeneity individual flourishing etic methodsemic methods independent & dependent variables causality, equilibrium Knightian uncertainty - agency transitive work (1) - knowledge-usingwork (2) - knowledge-making academics ‘theorizing’managers ‘framing’ 27-June-11IESE 2nd Theory of the Firm Conference 1/13

from method to substance ‘theory of the firm’ as socio-political entity - but which society ? society (markets) ‘firms’ production functions individuals - rational society (environment) ‘firms’ social systems system elements - rational society (democratic capitalism) socio-economic institutions & private-sector ‘firms’ individuals - ‘human’ economic modelsystems theory model humanizing model rationality - simple or behavioral or … homogeneous human being = a-rational, unique ? politics, sympathy, morality, emotion heterogeneity/agency/practice 27-June-11IESE 2nd Theory of the Firm Conference 2/13

‘rights’ - State, individual and owners’ humanizing (top level) - ‘society’ using power, regulation and other institutionalized constraints over private sector firms humanizing (bottom level) - e.g. legislation to protect employees’, customers’ and others’ ‘rights’ against the rights and powers legally granted to private-sector owners firms straddle state’s constrained rights to shape the firm and the firm’s constrained rights to shape the individual’s practice framing the private-sector firm (middle level) - back to the etic/emic 27-June-11IESE 2nd Theory of the Firm Conference conference target 3/13

27-June-11IESE 2nd Theory of the Firm Conference figure - ground reversal bottles or glasses ? 4/13

27-June-11IESE 2nd Theory of the Firm Conference 5/13

k-presences and k-absences that define ‘the BCG firm’ (Example1) 27-June-11IESE 2nd Theory of the Firm Conference interplay of k-presence and k- absence portfolio, life cycle, time firm (as cash machine) synthesized by executive agency judgments - allocation, dogs managing as agentic repairing - complementing rational designing 6/13

Porter’s firm (Example 2) 27-June-11IESE 2nd Theory of the Firm Conference firm not industry ‘force’ = power to disturb the firm’s rent-stream many dimensions of ‘force’ - multi- layered, multi-timed firm arises from agentic ‘positioning’ in a multi-dimensional force/time context 7/13

principal-agent theory’s firm ? (Example 3) 27-June-11IESE 2nd Theory of the Firm Conference Jensen & Meckling 1976 – single period – perfect markets Fama 1980 – multi-period – imperfect markets – mutual learning ‘firm’ arises from principal’s and agent’s time- full mutual learning and preparedness to adjust their utilities 8/13

‘ToF’ as defined k-absences to be filled by agency 27-June-11IESE 2nd Theory of the Firm Conference diagnostics - framing entrepreneurial ‘opportunity space’ executive’s ‘bounded agency’ T methodology - fact-driven analysis U methodology - coup d’oeil, augenblick preparation, history, theory (von Clausewitz) ‘added value’ - endogenous growth T T U U etic K-presence rationality emic K-absence imagination 9/13

emic firm analysis & construction 27-June-11IESE 2nd Theory of the Firm Conference technological advance competitor’s marketing labor market - Precariat government standards funding limits TMT’s moral/ ethical scruples business model business model might, can, should, want - LCAG’s 4 emic dimensions Balanced Scorecard - 4 etic? dimensions Spender - Industry Recipes (1989) - 12 emic dimensions unoccupied strategic opportunity-space executive agency 10/13

after the entrepreneur’s vision comes harnessing others’ reason & agency 27-June-11IESE 2nd Theory of the Firm Conference decision to participate - a matter of reason or persuasion ? incentives (extrinsic and intrinsic) - or rhetoric ? others offer both reason & agency firm (profit) arises from the subordination of others’ agency - not from instructions guiding others’ reason ‘docility’ - becoming ‘another’ beyond logos and into ethos & pathos stasis theory, argument theory, inventio work (1) ‘toil’ - work (2) ‘fulfillment’, ‘flow’ 11/13

Precariat - new meaning of ‘work’ 27-June-11IESE 2nd Theory of the Firm Conference not ‘participating’ in 20 th century-style work - e.g. long-term employment contracts, training, pensions, health-care not having one’s agency managed by others ‘living by one’s wits’ in today’s democratic capitalism undergrad business education - post-crisis, economic history, time graduate - staffer’s diagnostic tools (von Clausewitz) leadership - should BSchools teach rhetoric once again ? 12/13

summary 27-June-11IESE 2nd Theory of the Firm Conference humanizing (top level) - public control of private-sector firms’ activities humanizing (bottom level) - counter-balance owners’ legal rights mid-level synthesizing of T and U (Barnard 1938) rhetorical engagement of others’ agency + reasoning private-sector firms’ legitimate seizures - quasi-monopolies & employees’ agency humanizing mid-level - owners & managers acknowledging and remunerating the value added by others - both toil & fulfillment U - agency - rhetoric - practice - value-adding extending the BSchool agenda - diagnostic tools + rhetoric & art 13/13

27-June-11IESE 2nd Theory of the Firm Conference ‘theory of the firm’ - academic concept or real value-add ?