Sentences to Ponder

2 January 2009 at 10:24 am 3 comments

| Peter Klein |

[A] firm’s internal organization is not fully reducible to routines, norms, and firm-specific customs. The element of command — emphasized rightly by Coase and Williamson — is of great importance as well. A firm is neither reducible to custom and norms, nor to hierarchy and command. All elements interact strongly, and monetary incentives play a role as well.

That’s from Ekkehart Schlicht’s “Consistency in Organization,” in the December 2008 issue of JITE (not yet online; SSRN version here). Schlicht argues that the exercise of authority in organizations establishes precedent — commands to do this or that become routines or customs that are embedded into the organization’s culture — and that authority must be used consistently within the organization, suggesting limits to firm size and scope. Interesting read. Some similarities to Nickerson and Zenger’s envy theory.

Entry filed under: - Klein -, Management Theory, Theory of the Firm.

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3 Comments Add your own

  • 1. David Hoopes  |  4 January 2009 at 11:41 pm

    Is this news?

  • 2. Paolo Mariti  |  5 January 2009 at 4:34 am

    David’s question deserves a reply: no, it is not new.What is new is the fact that economists have at last made up their minds to go deep into the study, analyse and ponder of what’s inside the black box. In my opinion to make some progress on this matter we should avoid to make use of “phylosofical” and qualitatevily thin approaches based on broad unverified associations – not to be confused with qualified observations – of too many variables (e.g. envy theory, knowledge and capabilities,..)

  • 3. Ekkehart  |  14 April 2011 at 1:44 pm

    An updated version of the paper that is perhaps clearer on a number of issues and incorporates some new material is available at

    Click to access dp5644.pdf

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