New Foss Sell-Out (?) Paper

21 April 2009 at 6:08 am 6 comments

| Nicolai Foss |

With Siegwart Lindenberg, Professor of Cognitive Sociology at the University of Groningen, I have written “Why Firms Work?  A Goal-Framing Theory of the Firm.” Colleagues already refer to it as the “Foss sell-out paper” (but wait until I blog on that recent sell-out paper on entrepreneurship and the government by a certain O&M blogger . . . ). 

Whatever that is, the paper starts from the familiar and long-standing debate between organizational economists and proponents of the knowledge-based view, and the many interesting recent attempts to merge key insights from TCE with ideas on learning and capabilities (Argyres, Nickerson, Mayer, Leiblein, Zenger, Hoettker, and others). The underlying idea is that additional explanatory leverage, for example, with respect to understanding the boundaries of the firm, will emerge from an integration of the two (clusters of) theories.

The argument in  our paper is a very different one: The dominant extant conceptualizations of what firms are do not provide us with a satisfactory explanation of why firms work — specifically, how intelligent, adaptive effort can be mobilized by motivational means to contribute to joint production, that is, productive activities with a common goal and typically heterogeneous but complementary resources, task, and outcome interdependences. Such endeavors are basic to both human beings and human forms of cooperation. A theory of organization must be based on human capabilities for joint production. From an evolutionary point of view, the ability for joint production is what created the adaptive advantage of human beings living in larger groups, and it seems that our brain has evolved along these lines (the “social brain hypotheses,” Dunbar 2003). Firms work to the extent that they can motivate employees to contribute to joint production in this sense. 

The paper tries to build micro-foundations that will allow for more satisfactory answers to why firms work than the answers provided by organizational economics and the knowledge-based view. The key point in these micro-foundations is that the management of motivation is largely the management of cognitive processes, specifically the management of high-level goals. This implies that cognition and motivation are partly organizationally embedded. While the knowledge-based view also recognizes this embeddedness (Kogut and Zander, 1996; Ghoshal and Nahapiet, 1998), it has no supporting micro-foundations for this recognition. While organizational economics does have explicit micro-foundations, these micro-foundations completely separate cognition and motivation. Therefore, it does not include the notion that the management of motivation is largely the management of cognitive processes.

We draw on closely related research in different fields, namely social psychology (e.g., Ryan, Huta and Deci, 2008), evolutionary anthropology (e.g., Dunbar, 2003), cognitive science (Caporael, Dawes, Orbell, and Van de Kraagt, 1989), and cognitive sociology (Hogg, 2001; Lindenberg, 2003) to build a “goal-framing theory” of the firm that better identify the mechanisms that explain why firms work. We also indicate how these micro-foundations provide additional insight into traditional concerns in the theory of the firm, notably the issue of organizational failure.

Send me a mail at if you want a copy of the paper. Because we intend to send the paper to a journal that does not allow submitted manuscripts to be in the public (electronic) domain, I cannot post this paper.

Entry filed under: - Foss -, Papers, Recommended Reading, Theory of the Firm.

Dynamic Capabilities: The Emperor’s New Clothes? Killing the Fax

6 Comments Add your own

  • 1. Foss (allegedly) sells out « PublicOrgTheory  |  21 April 2009 at 7:05 am

    […] looking forward to reading “Why Firms Work:  A Goal-Framing Theory of the Firm”: The paper tries to build micro-foundations that will allow for more satisfactory answers to why […]

  • 2. Peter Klein  |  21 April 2009 at 9:23 am

    Hmmmm, as I recall, the term “sell-out” was a self-appellation.

  • 3. Nicolai Foss  |  21 April 2009 at 10:22 am

    Dude — pls don’t spoil my attempt to pose as a martyr here.

  • 4. josephlogan  |  21 April 2009 at 3:15 pm

    “allegedly”. I told Nicolai in an off-line note that geniuses have the option of selling out, but sellouts don’t have the option of becoming geniuses… or something like that.

    By the way, Nicolai, I am enjoying the paper. Enjoy your martyrdom.

  • 5. Nicolai Foss  |  21 April 2009 at 3:16 pm

    Thanks, Joseph. And thanks for the endorsement on your blog.

  • 6. Peter Klein  |  21 April 2009 at 4:04 pm

    I’ve been trying to sell out for years. The problem is I can’t find any buyers.

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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).

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