Archive for March, 2008

Jeffrey Pfeffer in the Lion’s Den

| Nicolai Foss |

Management theory heavy-weight and über-econ-basher Jeffrey Pfeffer (cf. these posts) makes an appeareance in the Fall 2007 issue of . . . the Journal of Economic Perspectives — admittedly a rather “open” journal, but still one of the house journals of the American Economic Association.  (more…)

31 March 2008 at 2:02 pm 4 comments

Newspapers as Coasian Firms

| Peter Klein |

The hunter-gatherer model of journalism is no longer sufficient. Citizens can do their own hunting and gathering on the Internet. What they need is somebody to add value to that information by processing it — digesting it, organizing it, making it usable.

This is why we still need newspapers — or something like them. Ronald Coase, the British economist, once asked why we need business firms. Why can’t all their activities be coordinated by individuals contracting with one another instead of working in a bureaucratic, command-and-control environment? The answer, he said, is transaction costs. If a manager had to negotiate with a free-lancer for every task, the cost in time would be unbearably high.

Searching for information on the Internet involves something like transaction costs because we have so many varied sources to evaluate. We need somebody we trust to organize them for us. That can be the task of the new journalism.

That’s from the retirement speech of UNC journalism professor

31 March 2008 at 8:43 am 2 comments

Mizzou J-School Centenary

| Peter Klein |

My colleague Steve Weinberg‘s new book on John D. Rockefeller and Ida Tarbell, Taking on the Trust, is reviewed in today’s Wall Street Journal. You can read an exerpt here (may be gated for non-subscribers). Steve has another new book, A Journalism of Humanity: A Candid History of the World’s First Journalism School, about the University of Missouri’s J-School, which is celebrating its centenary this year. As explained in the book the journalism school, like the first programs in business administration at Wharton, Tuck, HBS, and elsewhere, struggled to gain acceptance as a legitimate academic program and to escape the “trade-school” stigma.

While vocational programs in law and medicine have long been accepted as legitimate parts of the Academy, and engineering, agriculture, and architecture have been welcomed since at least the late 19th century (in the US, after the Morrill Act), business and journalism have faced particular difficulties becoming integrated into the academic mainstream. Actually, journalism today is even more of an outsider than business  administration; for example, while many B-school faculty hold PhDs in economics, sociology, psychology, or other “traditional” disciplines, many J-school professors do not hold PhDs at all, with most being former industry professionals, more like B-school clinical professors. Those of you interested in the history and current problems of business schools might learn something from the experiences of journalism and other professional schools.

28 March 2008 at 2:46 pm Leave a comment

The Make-or-Buy Decision: Corporate Lawyer Edition

| Peter Klein |

What are our Lawyers made of?
What are our Lawyers made of?
Of Causes and fees, demurrers and pleas,
Learned Brother and lots of pother,
Counsel and jury with very wise looks,
Flaw in the indictment and statue books,
Such are our Lawyers made of,
Such are our Lawyers made of.

That’s one answer. It ain’t sugar and spice and everything nice, that’s for sure. Whatever lawyers are made of, should firms make them in-house, or hire ones made by somebody else? Steven Schwarcz addresses this question in a new paper, “To Make or to Buy: In-House Lawyering and Value Creation” (Journal of Corporation Law, Winter 2008). Schwarcz notes that large firms have been shifting much of their transactional work from outside law firms to in-house lawyers. Analysis of survey data suggests that information costs and scale and scope economies are the most important drivers of this trend. Asset specificity seems to play a less important role, mainly because reputation effects are sufficient to mitigate opportunistic behavior by outside law firms. A very interesting paper on the make-or-buy decision.

28 March 2008 at 11:35 am Leave a comment

Riding Off Into the Sunset. . . .

| Steve Phelan |

Dear colleagues, this post represents my 22nd and final post as a guest blogger on O&M. Over the last four months I have learned a lot about blogs and successful blogging. For instance, the average post on O&M gets seen/read by about 70 people in the first 48 hours. Of these, perhaps only 5% will comment on a post. But blog posts have an incredibly “long tail”. The top posts on O&M average 3,000 or more views, with the top post over 7,000 views (see physics envy if you wish to add to the count). As a result of this long tail of posts, O&M receives about 1,000 hits per day! (more…)

27 March 2008 at 5:20 pm 6 comments

Shared Governance: Benefits and Costs

| Peter Klein |

Back in grad school I was regularly hectored by a fellow student about joining the Association of Graduate Student Employees (AGSE), our local collective-bargaining association. Despite his attempt to stigmatize me as a free rider, I never joined. I didn’t think I agreed with the organizations goals, and I was sure I didn’t want to be associated with AGSE’s parent organization, the United Auto Workers (go figure). One year there was even a strike, which I found silly (I scabbed).

This semester I’m getting repeated invitations to join the American Association of University Professors (AAUP). Again, I hesitate. Of course, as an American university professor, I’m happy to see more power, prestige, and perquisites go to American university professors (OK, specifically, to me). But the AAUP has a strange agenda. Its mission includes not only protecting academic freedom and defending the role of the university in public life, but also preserving shared governance. Having spent many years in university settings, I’m convinced that shared governance is grossly inefficient, at least most of the time. There can be benefits, of course, to offset these costs, as is the case with worker-owned cooperatives and other non-standard forms of organization. But one searches the AAUP’s website in vain for any analysis or evidence on shared governance. What are the benefits and costs, relative to other feasible organizational forms? Why should professors defend this peculiar institution? (more…)

27 March 2008 at 9:45 am 4 comments

The Real March Madness

| Peter Klein |

Have you filled out your bailout bracket?


27 March 2008 at 8:59 am Leave a comment

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Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).