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

2. organization / firm environment market people (e.g. employee) things (e.g. resource, routine) units of analysis & problematics 11-May-20102ESADE seminar boundary fit adapt change vitality manage

3. 1 st - 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 11-May-2010ESADE seminar3

4. 2 nd - non-systems - societies writ small ? 11-May-2010ESADE seminar4 society gemeineschaft gesellschaft Natural Law - ethics, duty Natural Rights - freedom property invisible hand & economic man * imperfections of two types organization John Locke

5. John Locke 1632-1704 11-May-2010ESADE seminar5 Michael Dahl, oil on canvas, 1696

6. 3 rd - theories of employment 11-May-2010ESADE seminar6 tyranny oath market“employment” Coase - subordination principal-agent theory rational-expectations Barnard - executive contribution (Etzioni) coercivecultural calculative what MoI to adopt? What does s/he do? what MoI to adopt? What does s/he do? nexus of contracts transaction cost - governance Simon - docility endogenous growth entrepreneurship

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 11-May-2010ESADE seminar7 peoplethings elementsPATRBV/IO/5F entitiesTCETP/PR Penrose 1959 decomposable systems Simon (PAPS 1962)

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 11-May-2010ESADE seminar8 rationalityjudgment reasoned practice

9. Barnard 11-May-2010ESADE seminar9 personal socialphysical executive function “organizational system”

10. Porter 11-May-2010ESADE seminar10 competitors customers suppliers new entrants substitutes value chain / rent stream confidence level evaluating mkt power industry - strategic group managerial choice

11. principal-agent Jensen & Meckling agency costs – monitoring – bonding – residual loss incentive design single period - time-less single dimension/resource determinative BUT - logical error 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 11-May-2010ESADE seminar11

12. determined vs agentic action 11-May-2010ESADE seminar12 independent & dependent variables primacy of analysis I1 I2 I3 D managing causes to command & control effects interactive / under-determined open space action non-objective constraints primacy of Q = agency & experience D = f (I 1-n ) + ε O = f (C 1-n ) * Q Schumpeter C1 C2 C3 selecting field of action & put in motion

13. managing ? theory - positivist finding a theory discovery of facts analysis rational choice control measurement objective framework - constructivist managerial choice in-the-world milieu experienced constraints judging possibilities acting learning subjective 11-May-2010ESADE seminar13

14. ToF as Framework sole entrepreneur factor Q all one can say theory of judgment 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 11-May-2010ESADE seminar14

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 11-May-2010ESADE seminar15

16. 11-May-2010ESADE seminar16

17. 11-May-2010ESADE seminar17 agentic/openinstrumental/closed elementsPATRBV entitiesTCE/5FTP/PR