Organizations and Markets

Hoisted from the Comments: Hoopes on Williamson

13 October 2009 at 3:36 pm Peter G. Klein 5 comments

| Peter Klein |

Former guest blogger David Hoopes’s comment deserves its own post:

So, we’re leaving the serious discussion to our goody two-shoes organizations twin? Was Will Mitchell a Williamson student? No one has said anything about Teece. Teece’s early JEBO articles did a great job talking about economies of scope and transaction cost influences on strategy.

Unmentioned yet, there has been some contentious discussion about the implications of TC economics on strategy and organization. Many including Connor and Prahalad consider the implications of TC to lead to bad management and bad strategy. However, our very own Steve Postrel wrote a great paper, “Islands of Shared Knowledge” that (esp in an earlier version) does a great job of comparing and contrasting the RBV and TC as theories of the firm.

Harold Demsetz weighed in on this earlier in his, “Theory of the Firm Revisited” (which is one of my favorite all time papers). Harold argues that firms would exist without governance problems. Steve has tried to get Harold to see the light (i’m not sure i do) but to no avail.

Of course, CERTAIN org theorists, whose names i do not mention think that Williamson’s logic, as does all competition-based economic theory, leads to evil and terrible results: unethical business students who become tomorrow’s headlines.

I’m very happy to see Williamson win. His influence on strategy and organization is immense. And, at this point, I don’t see any theory of the competitive firm can reasonably leave him out. I will admit, in terms of competitive heterogeneity and competitive advantage I don’t think governance is anywhere near as important as productive capabilities. BUT, capabilities literature still has a lot of work to do to be specified as exactly as TCE.

David, more serious discussion is on the way. Unfortunately, we O&Mers have higher opportunity costs than the bloggers at our good-twin site, so we can’t get the posts up as quickly as they can. :-)

Entry filed under: - Klein -, Former Guest Bloggers, Management Theory, New Institutional Economics, People, Strategic Management, Theory of the Firm.