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The Economics of Modern Business Enterprise
Martin Ricketts, a leading scholar in this field, has selected the seminal papers from a variety of traditions that illustrate the evolution of thinking on ‘the firm’ over a considerable period of time. The firm as a vehicle for entrepreneurial initiative and the exercise of business judgement is contrasted throughout with the firm as a policing mechanism in response to known contractual hazards.
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Critical Acclaim
Contributors
Contents
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Martin Ricketts, a leading scholar in this field, has selected the seminal papers from a variety of traditions that illustrate the evolution of thinking on ‘the firm’ over a considerable period of time. The firm as a vehicle for entrepreneurial initiative and the exercise of business judgement is contrasted throughout with the firm as a policing mechanism in response to known contractual hazards.
The selection is in three volumes that cover respectively the general theoretical background; the ownership and scope of the firm – its degree of vertical and transnational integration; and agency issues relating to employee incentives and the control of managers. This authoritative collection will provide a valuable reference, of interest to students, postgraduates and professional economists seeking an overview of the subject and its evolution.
The selection is in three volumes that cover respectively the general theoretical background; the ownership and scope of the firm – its degree of vertical and transnational integration; and agency issues relating to employee incentives and the control of managers. This authoritative collection will provide a valuable reference, of interest to students, postgraduates and professional economists seeking an overview of the subject and its evolution.
Critical Acclaim
‘The Economics of Modern Business Enterprise, edited by Martin Ricketts, focuses upon the historical development of the transaction cost view of the firm – with “transaction cost” interpreted rather broadly. Its three volumes comprise the most influential papers in the field, introduced by the editor with an extremely well written introduction. The three volumes address graduate students of business economics. They are so well selected, ordered and introduced that they may as well serve as a handbook on “the new institutional economics of the firm.”’
– Rudolf Richter, Saarland University, Germany and The Hoover Institution, Stanford University, US
‘Martin Ricketts’ collection of leading articles on “The Economics of Modern Business Enterprise” is organized in three volumes: “Transaction Costs, Property Rights and the Entrepreneur,” “Ownership and Scope,” and “Incentives and Control.” No student of business and economic organization can fail to be impressed by Ricketts’ knowledge of this literature. Equally important is the manner in which this collection is organized: Ricketts tracks the historical development of key ideas in this area from early contributions in the 1970s to the present and uses “transaction costs,” broadly construed, as the organizing theme. This vast literature is given added meaning and perspective in the process, to the benefit of both new and active participants. This collection not only, therefore, records the significant accomplishments of this exciting research arena but will serve as a springboard for the continuation thereof.’
– Oliver E. Williamson, University of California, Berkeley, US
– Rudolf Richter, Saarland University, Germany and The Hoover Institution, Stanford University, US
‘Martin Ricketts’ collection of leading articles on “The Economics of Modern Business Enterprise” is organized in three volumes: “Transaction Costs, Property Rights and the Entrepreneur,” “Ownership and Scope,” and “Incentives and Control.” No student of business and economic organization can fail to be impressed by Ricketts’ knowledge of this literature. Equally important is the manner in which this collection is organized: Ricketts tracks the historical development of key ideas in this area from early contributions in the 1970s to the present and uses “transaction costs,” broadly construed, as the organizing theme. This vast literature is given added meaning and perspective in the process, to the benefit of both new and active participants. This collection not only, therefore, records the significant accomplishments of this exciting research arena but will serve as a springboard for the continuation thereof.’
– Oliver E. Williamson, University of California, Berkeley, US
Contributors
71 articles, dating from 1921 to 2006
Contributors include: M. Casson, A. Chandler, R. Coase, J. Dunning, N. Foss, B. Frey, H. Hansmann, O. Hart, I. Kirzner, B. Klein, E. Lazear, O. Williamson
Contributors include: M. Casson, A. Chandler, R. Coase, J. Dunning, N. Foss, B. Frey, H. Hansmann, O. Hart, I. Kirzner, B. Klein, E. Lazear, O. Williamson
Contents
Contents:
Volume I: Transaction Costs, Property Rights and the Entrepreneur
Acknowledgements
Introduction Martin Ricketts
PART I TRANSACTIONS COSTS, THE MARKET AND THE FIRM
1. Frank H. Knight (1921), ‘Enterprise and Profit’
2. R.H. Coase (1937), ‘The Nature of the Firm’
3. Fritz Machlup (1967), ‘Theories of the Firm: Marginalist, Behavioral, Managerial’
4. Armen A. Alchian and Harold Demsetz (1972), ‘Production, Information Costs, and Economic Organization’
5. Oliver E. Williamson (1979), ‘Transaction-Cost Economics: The Governance of Contractual Relations’
6. Oliver E. Williamson (1981), ‘The Modern Corporation: Origins, Evolution, Attributes’
7. Robert B. Ekelund, Jr. and Robert D. Tollison (1980), ‘Mercantilist Origins of the Corporation’
8. Armen A. Alchian and Susan Woodward (1987), ‘Reflections on the Theory of the Firm’
PART II THE ENTREPRENEUR
9. Alfred Marshall ([1925]1953), ‘Industrial Organization, Continued. Business Management’
10. Joseph A. Schumpeter (1950), ‘Crumbling Walls’
11. Israel M. Kirzner (1973), ‘The Entrepreneur’
12. B.J. Loasby (1982), ‘The Entrepreneur in Economic Theory’
13. Ulrich Witt (1987), ‘How Transaction Rights Are Shaped to Channel Innovativeness’
14. Nicolai Juul Foss (1993), ‘Theories of the Firm: Contractual and Competence Perspectives’
15. Mark Casson (2000), ‘An Entrepreneurial Theory of the Firm’
PART III PRINCIPAL AND AGENT
16. Kenneth J. Arrow (1985), ‘The Economics of Agency’
17. Steven Shavell (1979), ‘Risk Sharing and Incentives in the Principal and Agent Relationship’
18. Martin Ricketts (1986), ‘The Geometry of Principal and Agent: Yet Another Use for the Edgeworth Box’
19. Harold Demsetz (1995), ‘Agency and Nonagency Explanations of the Firm’s Organization’
PART IV PROPERTY RIGHTS AND THE FIRM
20. Sanford J. Grossman and Oliver D. Hart (1986), ‘The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration’
21. Oliver Hart and John Moore (1990), ‘Property Rights and the Nature of the Firm’
22. Oliver Hart (1995), ‘Established Theories of the Firm’ and ‘The Property Rights Approach’
23. Bengt Holmström and John Roberts (1998), ‘The Boundaries of the Firm Revisited’
Name Index
Volume II: Ownership and Scope
Acknowledgements
An introduction by the editor to all three volumes appears in Volume I
PART I OWNERSHIP OF THE FIRM
1. Adam Gifford, Jr. (1991), ‘A Constitutional Interpretation of the Firm’
2. Henry Hansmann (1996), ‘A Theory of Enterprise Ownership’
3. Benjamin Ward (1958), ‘The Firm in Illyria: Market Syndicalism’
4. Eirik G. Furubotn (1988), ‘Codetermination and the Modern Theory of the Firm: A Property-Rights Analysis’
5. Eugene Kandel and Edward P. Lazear (1992), ‘Peer Pressure and Partnerships’
6. Henry Hansmann (1987), ‘Economic Theories of Nonprofit Organization’
7. Edwin G. West (1989), ‘Nonprofit Organizations: Revised Theory and New Evidence’
PART II THE SCOPE OF THE FIRM
A The Franchise Contract
8. Paul H. Rubin (1978), ‘The Theory of the Firm and the Structure of the Franchise Contract’
9. G. Frank Mathewson and Ralph A. Winter (1985), ‘The Economics of Franchise Contracts’
10. Robert E. Martin (1988), ‘Franchising and Risk Management’
11. Antony W. Dnes (1992), ‘”Unfair” Contractual Practices and Hostages in Franchise Contracts’
12. Alanson P. Minkler (1992), ‘Why Firms Franchise: A Search Cost Theory’
B Vertical Integration
13. Kenneth J. Arrow (1975), ‘Vertical Integration and Communication’
14. Benjamin Klein, Robert G. Crawford and Armen A. Alchian (1978), ‘Vertical Integration, Appropriable Rents, and the Competitive Contracting Process’
15. Kirk Monteverde and David J. Teece (1982), ‘Appropriable Rents and Quasi-Vertical Integration’
16. Ramon Casadesus-Masanell and Daniel F. Spulber (2000), ‘The Fable of Fisher Body’
17. Ronald Coase (2006), ‘The Conduct of Economics: The Example of Fisher Body and General Motors’
18. Benjamin Klein (2007), ‘The Economic Lessons of Fisher Body-General Motors’
19. John M. Vernon and Daniel A. Graham (1971), ‘Profitability of Monopolization by Vertical Integration’
20. Richard Schmalensee (1973), ‘A Note on the Theory of Vertical Integration’
21. Martin K. Perry (1980), ‘Forward Integration by Alcoa: 1888–1930’
C Transnational Integration
22. John H. Dunning (1973), ‘The Determinants of International Production’
23. Alfred D. Chandler (1980), ‘The Growth of the Transnational Industrial Firm in the United States and the United Kingdom: A Comparative Analysis’
24. John Cantwell (2000), ‘A Survey of Theories of International Production’
25. Keith Cowling and Roger Sugden (1987), ‘The Rise of Transnationals and International Division of Labour’
Name Index
Volume III: Incentives and Control
Acknowledgements
An introduction by the editor to all three volumes appears in Volume I
PART I THE CONTRACT OF EMPLOYMENT
1. Oliver E. Williamson, Michael L. Wachter and Jeffrey E. Harris (1975), ‘Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange’
2. Joseph E. Stiglitz (1975), ‘Incentives, Risk, and Information: Notes Towards a Theory of Hierarchy’
3. Carl Shapiro and Joseph E. Stiglitz (1984), ‘Equilibrium Unemployment as a Worker Discipline Device’
4. Edward P. Lazear and Sherwin Rosen (1981), ‘Rank-Order Tournaments as Optimum Labor Contracts’
5. Edward P. Lazear (1981), ‘Agency, Earnings Profiles, Productivity, and Hours Restrictions’
6. Robert M. Hutchens (1989), ‘Seniority, Wages and Productivity: A Turbulent Decade’
7. Edward P. Lazear (2000), ‘The Future of Personnel Economics’
8. Bruno S. Frey (1993), ‘Does Monitoring Increase Work Effort? The Rivalry with Trust and Loyalty’
PART II MANAGEMENT INCENTIVES
9. Armen A. Alchian (1969), ‘Corporate Management and Property Rights’
10. Michael C. Jensen and William H. Meckling (1976), ‘Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure’
11. Michael C. Jensen and Kevin J. Murphy (1990), ‘Performance Pay and Top-Management Incentives’
12. Joseph G. Haubrich (1994), ‘Risk Aversion, Performance Pay, and the Principal-Agent Problem’
13. Brian J. Hall and Jeffrey B. Liebman (1998), ‘Are CEOs Really Paid Like Bureaucrats?’
14. Eugene F. Fama (1980), ‘Agency Problems and the Theory of the Firm’
15. Eugene F. Fama and Michael C. Jensen (1983), ‘Agency Problems and Residual Claims’
16. Oliver D. Hart (1983), ‘The Market Mechanism as an Incentive Scheme’
PART III THE MARKET IN CORPORATE CONTROL
17. Henry G. Manne (1965), ‘Mergers and the Market for Corporate Control’
18. Sanford J. Grossman and Oliver D. Hart (1980), ‘Takeover Bids, the Free Rider Problem, and the Theory of the Corporation’
19. Michael C. Jensen (1988), ‘Takeovers: Their Causes and Consequences’
20. Andrei Shleifer and Lawrence H. Summers (1988), ‘Breach of Trust in Hostile Takeovers’
21. Andrei Shleifer and Robert W. Vishny (1986), ‘Large Shareholders and Corporate Control’
PART IV COMPARING GOVERNANCE TYPES
22. Masahiko Aoki (1990), ‘Toward an Economic Model of the Japanese Firm’
23. Jens Köke and Luc Renneboog (2005), ‘Do Corporate Control and Product Market Competition Lead to Stronger Productivity Growth? Evidence from Market–Oriented and Blockholder-Based Governance Regimes’
Name Index
Volume I: Transaction Costs, Property Rights and the Entrepreneur
Acknowledgements
Introduction Martin Ricketts
PART I TRANSACTIONS COSTS, THE MARKET AND THE FIRM
1. Frank H. Knight (1921), ‘Enterprise and Profit’
2. R.H. Coase (1937), ‘The Nature of the Firm’
3. Fritz Machlup (1967), ‘Theories of the Firm: Marginalist, Behavioral, Managerial’
4. Armen A. Alchian and Harold Demsetz (1972), ‘Production, Information Costs, and Economic Organization’
5. Oliver E. Williamson (1979), ‘Transaction-Cost Economics: The Governance of Contractual Relations’
6. Oliver E. Williamson (1981), ‘The Modern Corporation: Origins, Evolution, Attributes’
7. Robert B. Ekelund, Jr. and Robert D. Tollison (1980), ‘Mercantilist Origins of the Corporation’
8. Armen A. Alchian and Susan Woodward (1987), ‘Reflections on the Theory of the Firm’
PART II THE ENTREPRENEUR
9. Alfred Marshall ([1925]1953), ‘Industrial Organization, Continued. Business Management’
10. Joseph A. Schumpeter (1950), ‘Crumbling Walls’
11. Israel M. Kirzner (1973), ‘The Entrepreneur’
12. B.J. Loasby (1982), ‘The Entrepreneur in Economic Theory’
13. Ulrich Witt (1987), ‘How Transaction Rights Are Shaped to Channel Innovativeness’
14. Nicolai Juul Foss (1993), ‘Theories of the Firm: Contractual and Competence Perspectives’
15. Mark Casson (2000), ‘An Entrepreneurial Theory of the Firm’
PART III PRINCIPAL AND AGENT
16. Kenneth J. Arrow (1985), ‘The Economics of Agency’
17. Steven Shavell (1979), ‘Risk Sharing and Incentives in the Principal and Agent Relationship’
18. Martin Ricketts (1986), ‘The Geometry of Principal and Agent: Yet Another Use for the Edgeworth Box’
19. Harold Demsetz (1995), ‘Agency and Nonagency Explanations of the Firm’s Organization’
PART IV PROPERTY RIGHTS AND THE FIRM
20. Sanford J. Grossman and Oliver D. Hart (1986), ‘The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration’
21. Oliver Hart and John Moore (1990), ‘Property Rights and the Nature of the Firm’
22. Oliver Hart (1995), ‘Established Theories of the Firm’ and ‘The Property Rights Approach’
23. Bengt Holmström and John Roberts (1998), ‘The Boundaries of the Firm Revisited’
Name Index
Volume II: Ownership and Scope
Acknowledgements
An introduction by the editor to all three volumes appears in Volume I
PART I OWNERSHIP OF THE FIRM
1. Adam Gifford, Jr. (1991), ‘A Constitutional Interpretation of the Firm’
2. Henry Hansmann (1996), ‘A Theory of Enterprise Ownership’
3. Benjamin Ward (1958), ‘The Firm in Illyria: Market Syndicalism’
4. Eirik G. Furubotn (1988), ‘Codetermination and the Modern Theory of the Firm: A Property-Rights Analysis’
5. Eugene Kandel and Edward P. Lazear (1992), ‘Peer Pressure and Partnerships’
6. Henry Hansmann (1987), ‘Economic Theories of Nonprofit Organization’
7. Edwin G. West (1989), ‘Nonprofit Organizations: Revised Theory and New Evidence’
PART II THE SCOPE OF THE FIRM
A The Franchise Contract
8. Paul H. Rubin (1978), ‘The Theory of the Firm and the Structure of the Franchise Contract’
9. G. Frank Mathewson and Ralph A. Winter (1985), ‘The Economics of Franchise Contracts’
10. Robert E. Martin (1988), ‘Franchising and Risk Management’
11. Antony W. Dnes (1992), ‘”Unfair” Contractual Practices and Hostages in Franchise Contracts’
12. Alanson P. Minkler (1992), ‘Why Firms Franchise: A Search Cost Theory’
B Vertical Integration
13. Kenneth J. Arrow (1975), ‘Vertical Integration and Communication’
14. Benjamin Klein, Robert G. Crawford and Armen A. Alchian (1978), ‘Vertical Integration, Appropriable Rents, and the Competitive Contracting Process’
15. Kirk Monteverde and David J. Teece (1982), ‘Appropriable Rents and Quasi-Vertical Integration’
16. Ramon Casadesus-Masanell and Daniel F. Spulber (2000), ‘The Fable of Fisher Body’
17. Ronald Coase (2006), ‘The Conduct of Economics: The Example of Fisher Body and General Motors’
18. Benjamin Klein (2007), ‘The Economic Lessons of Fisher Body-General Motors’
19. John M. Vernon and Daniel A. Graham (1971), ‘Profitability of Monopolization by Vertical Integration’
20. Richard Schmalensee (1973), ‘A Note on the Theory of Vertical Integration’
21. Martin K. Perry (1980), ‘Forward Integration by Alcoa: 1888–1930’
C Transnational Integration
22. John H. Dunning (1973), ‘The Determinants of International Production’
23. Alfred D. Chandler (1980), ‘The Growth of the Transnational Industrial Firm in the United States and the United Kingdom: A Comparative Analysis’
24. John Cantwell (2000), ‘A Survey of Theories of International Production’
25. Keith Cowling and Roger Sugden (1987), ‘The Rise of Transnationals and International Division of Labour’
Name Index
Volume III: Incentives and Control
Acknowledgements
An introduction by the editor to all three volumes appears in Volume I
PART I THE CONTRACT OF EMPLOYMENT
1. Oliver E. Williamson, Michael L. Wachter and Jeffrey E. Harris (1975), ‘Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange’
2. Joseph E. Stiglitz (1975), ‘Incentives, Risk, and Information: Notes Towards a Theory of Hierarchy’
3. Carl Shapiro and Joseph E. Stiglitz (1984), ‘Equilibrium Unemployment as a Worker Discipline Device’
4. Edward P. Lazear and Sherwin Rosen (1981), ‘Rank-Order Tournaments as Optimum Labor Contracts’
5. Edward P. Lazear (1981), ‘Agency, Earnings Profiles, Productivity, and Hours Restrictions’
6. Robert M. Hutchens (1989), ‘Seniority, Wages and Productivity: A Turbulent Decade’
7. Edward P. Lazear (2000), ‘The Future of Personnel Economics’
8. Bruno S. Frey (1993), ‘Does Monitoring Increase Work Effort? The Rivalry with Trust and Loyalty’
PART II MANAGEMENT INCENTIVES
9. Armen A. Alchian (1969), ‘Corporate Management and Property Rights’
10. Michael C. Jensen and William H. Meckling (1976), ‘Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure’
11. Michael C. Jensen and Kevin J. Murphy (1990), ‘Performance Pay and Top-Management Incentives’
12. Joseph G. Haubrich (1994), ‘Risk Aversion, Performance Pay, and the Principal-Agent Problem’
13. Brian J. Hall and Jeffrey B. Liebman (1998), ‘Are CEOs Really Paid Like Bureaucrats?’
14. Eugene F. Fama (1980), ‘Agency Problems and the Theory of the Firm’
15. Eugene F. Fama and Michael C. Jensen (1983), ‘Agency Problems and Residual Claims’
16. Oliver D. Hart (1983), ‘The Market Mechanism as an Incentive Scheme’
PART III THE MARKET IN CORPORATE CONTROL
17. Henry G. Manne (1965), ‘Mergers and the Market for Corporate Control’
18. Sanford J. Grossman and Oliver D. Hart (1980), ‘Takeover Bids, the Free Rider Problem, and the Theory of the Corporation’
19. Michael C. Jensen (1988), ‘Takeovers: Their Causes and Consequences’
20. Andrei Shleifer and Lawrence H. Summers (1988), ‘Breach of Trust in Hostile Takeovers’
21. Andrei Shleifer and Robert W. Vishny (1986), ‘Large Shareholders and Corporate Control’
PART IV COMPARING GOVERNANCE TYPES
22. Masahiko Aoki (1990), ‘Toward an Economic Model of the Japanese Firm’
23. Jens Köke and Luc Renneboog (2005), ‘Do Corporate Control and Product Market Competition Lead to Stronger Productivity Growth? Evidence from Market–Oriented and Blockholder-Based Governance Regimes’
Name Index
