Foss & Klein Chapter on “Organizational Governance”

9 October 2007 at 12:48 pm Nicolai Foss Leave a comment

| Nicolai Foss |

Peter and I often get requests that we blog something of a more introductory nature on organizational economics, the theory of the firm, etc. Until now, we haven’t really had the opportunity.

However, we just completed a draft of a chapter on “Organizational Governance” for the Handbook of Rational Choice Social Research, a major project initiated by sociology professors Rafael Wittek, Tom Snijders and Victor Nee for the Russell Sage Foundations (thus dispelling strange claims by Brayden and others that this is the anti-sociology blog). As the title suggests, the contributors, representing economics (/game theory), anthropology, and sociology are united by their commitment to the rational choice approach. The project involves such luminaries as Avner Greif, Jean Ensminger, Sigwart Lindenberg, and others. You can find the chapter under “Papers.”

Our chapter mainly summarizes organizational economics on a sort of “intermediate” level. It may be used for courses in new institutional economics and organizational economics. This is an early version and we would appreciate comments and suggestions. Here is our rather terse abstract:

This chapter reviews and discusses rational-choice approaches to organizational governance. These approaches are found primarily in organizational economics (virtually no rational-choice organizational sociology exists), particularly in transaction cost economics, principal-agent theory, and the incomplete-contracts or property-rights approach. We distill the main unifying characteristics of these streams, survey each stream, and offer some critical commentary and suggestions for moving forward.