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Austrian Economics and the Theory of the Firm

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Author Info
Nicolai J. Foss

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Abstract

Like most economists, Austrians have not shown much interest in the theory of the firm. This paper argues, however, that there is much in Austrian economics that dovetails with contemporary theorizing about the firm. Specifically, Austrian economics (in its Hayekian version) is compared to the two dominant approaches to the firm, the contractual and capabilities approaches. Austrian insights in the division of knowledge and the coordination of knowledge as well as insights in entrepreneurship complement this literature. However, it is also possible to develop a distinctly Austrian (coordination) view on firms that differs from both the contractual and the capabilities perspective. Whereas the contractual perspective conceptualizes the firm as nothing but a structure of incentives and property rights and the capabilities perspective conceptualizes the firm as a stock of given knowledge assets, the coordination view tends to see the firm as an entity that organizes a localized discovery procedures in the context of a structure of incomplete contracts and supporting shared mental constructs. In other words, the firm is seen as a cognitive entity.

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Paper provided by Department of Industrial Economics and Strategy, Copenhagen Business School in its series IVS/CBS Working Papers with number 97-3.

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Handle: RePEc:ivs:iivswp:97-3

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Web page: http://www.cbs.dk/forskning_viden/fakulteter_institutter_centre/institutter/oekonomi/ivs/

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Related research
Keywords: Austrian economics; contracts; capabilities;

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December. [Downloadable!] (restricted)
    Other versions:
  2. Foss, Nicolai Juul, 1993. "Theories of the Firm: Contractual and Competence Perspectives," Journal of Evolutionary Economics, Springer, vol. 3(2), pages 127-44, May.
  3. Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133 Elsevier. [Downloadable!] (restricted)
  4. Foss, Nicolai Juul, 1994. " The Theory of the Firm: The Austrians as Precursors and Critics of Contemporary Theory," The Review of Austrian Economics, Springer, vol. 7(1), pages 31-65.
  5. Nicolai J Foss & Jens Frøslev Christensen, 2001. "A market-process approach to corporate coherence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(4-5), pages 213-226. [Downloadable!]
  6. R. H. Coase, 1972. "Industrial Organization: A Proposal for Research," NBER Chapters, in: Economic Research: Retrospect and Prospect Vol 3: Policy Issues and Research Opportunities in Industrial Organization, pages 59-73 National Bureau of Economic Research, Inc. [Downloadable!]
  7. Brian J Loasby, 1994. "Understanding Markets," Working Papers Series 94/4, University of Stirling, Department of Economics.
  8. Klein, Peter G, 1996. " Economic Calculation and the Limits of Organization," The Review of Austrian Economics, Springer, vol. 9(2), pages 3-28.
  9. Foss, Nicolai J, 1997. "On the Rationales of Corporate Headquarters," Industrial and Corporate Change, Oxford University Press, vol. 6(2), pages 313-38, March.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Evelyn Gick, Wolfgang Gick, 2000. "Hayek's Theory of Cultural Evolution Revisited: Rules, Morality, and the Sensory Order," Working Paper Series B 2000-01, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät. [Downloadable!]
  2. Nicolai J. Foss, 1998. "Firms and the Coordination of KnowledgeSome Austrian Insights," DRUID Working Papers 98-19, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
  3. Nicolai Foss & Kirsten Foss & Peter G. Klein & Sandra K. Klein, . "Heterogeneous Capital, Entrepreneurship, and Economic Organization," IVS/CBS Working Papers 2002-02, Department of Industrial Economics and Strategy, Copenhagen Business School. [Downloadable!]
    Other versions:
  4. Nicolai Foss, . "Market Process Economics and the Theory of the Firm," IVS/CBS Working Papers 98-6, Department of Industrial Economics and Strategy, Copenhagen Business School. [Downloadable!]
  5. Fikret Adaman & Pat Devine, 2002. "A Reconsideration of the Theory of Entrepreneurship: a participatory approach," Review of Political Economy, Taylor and Francis Journals, vol. 14(3), pages 329-355, July. [Downloadable!] (restricted)
  6. Tony Fu-Lai Yu, 2003. "A subjectivist approach to strategic management," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(4), pages 335-345. [Downloadable!]
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