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The neglect of society in the theory of the firm: a systems-theory perspective

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  • Spencer Thompson
  • Vladislav Valentinov

Abstract

The prevailing theories of the firm acknowledge the importance of trust and loyalty but neglect such behaviour in the substance of their analyses. The present paper unravels this paradox by drawing on Niklas Luhmann’s ground-breaking insight that the complexity-reducing function of social systems leads them to neglect their critical environmental dependencies, thereby compromising their own sustainability. If the firm is conceived as a social system, Luhmann’s theory implies that the neglect of social behaviour by the predominant theories of the firm can be explained as reflecting the neglect of society by actual firms. This argument promises to not only furnish the theory of the firm with a concern for sustainability, but also render it more amenable to unconventional institutions, such as cooperatives and non-profit organisations, that help compensate for the damage inflicted by conventional firms on the social environment.

Suggested Citation

  • Spencer Thompson & Vladislav Valentinov, 2017. "The neglect of society in the theory of the firm: a systems-theory perspective," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 41(4), pages 1061-1085.
    • Handle: RePEc:oup:cambje:v:41:y:2017:i:4:p:1061-1085.
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    File URL: http://hdl.handle.net/10.1093/cje/bew072
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    1. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58(3), pages 211-211.
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    Cited by:

    1. Vladislav Valentinov, 2019. "The Ethics of Functional Differentiation: Reclaiming Morality in Niklas Luhmann’s Social Systems Theory," Journal of Business Ethics, Springer, vol. 155(1), pages 105-114, March.
    2. Chatalova, Lioudmila & Djanibekov, Nodir & Gagalyuk, Taras & Valentinov, Vladislav, 2017. "The paradox of water management projects in Central Asia: An institutionalist perspective," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 9(4), pages 1-14.
    3. Agafonow, Alejandro & Perez, Marybel, 2024. "In search of a non-anthropocentric middle-range theory of the firm: On how the Patagonia Purpose Trust granted a controlling stake to nature," Ecological Economics, Elsevier, vol. 217(C).
    4. Vladislav Valentinov, 2022. "System or Process? A Meta-theoretical Reflection on the Nature of the Firm," Systemic Practice and Action Research, Springer, vol. 35(1), pages 1-14, February.
    5. Frederik Banning & Jessica Reale & Michael Roos, 2023. "The Complexity of Corporate Culture as a Potential Source of Firm Profit Differentials," Papers 2305.14029, arXiv.org, revised Nov 2023.
    6. Valentinov, Vladislav & Chia, Robert, 2022. "Stakeholder theory: A process‐ontological perspective," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 31(3), pages 762-776.
    7. Eddi Fontanari & Silvia Sacchetti, 2019. "The Knowledge-based Agricultural Cooperative: A Validation from the Trentino Case," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 8(2), pages 46-70.
    8. Zhang, Shemei & Sun, Zhanli & Ma, Wanglin & Valentinov, Vladislav, 2020. "The effect of cooperative membership on agricultural technology adoption in Sichuan, China," China Economic Review, Elsevier, vol. 62(C).
    9. Vladislav Valentinov, 2023. "Stakeholder Theory: Toward a Classical Institutional Economics Perspective," Journal of Business Ethics, Springer, vol. 188(1), pages 75-88, November.
    10. Valentinov, Vladislav & Roth, Steffen, 2022. "Chester Barnard’s theory of the firm: An institutionalist view," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 56(3), pages 707-720.
    11. Constantine Iliopoulos & Vladislav Valentinov, 2018. "Member Heterogeneity in Agricultural Cooperatives: A Systems-Theoretic Perspective," Sustainability, MDPI, vol. 10(4), pages 1-22, April.
    12. José Antonio Plaza‐Úbeda & Miguel Pérez‐Valls & José Joaquín Céspedes‐Lorente & Belén Payán‐Sánchez, 2020. "The contribution of systems theory to sustainability in degrowth contexts: The role of subsystems," Systems Research and Behavioral Science, Wiley Blackwell, vol. 37(1), pages 68-81, January.
    13. Tortia, Ermanno C., 2021. "Employment protection regimes and dismissal of members in worker cooperatives," MPRA Paper 109214, University Library of Munich, Germany.
    14. Steffen Roth & Vladislav Valentinov & Markus Heidingsfelder & Miguel Pérez-Valls, 2020. "CSR Beyond Economy and Society: A Post-capitalist Approach," Journal of Business Ethics, Springer, vol. 165(3), pages 411-423, September.
    15. Adam Leaver & Keir Martin, 2021. "‘Dams and flows’: boundary formation and dislocation in the financialised firm," Review of Evolutionary Political Economy, Springer, vol. 2(3), pages 403-429, December.
    16. Plaček, Michal & Valentinov, Vladislav & del Campo, Cristina & Vaceková, Gabriela & Ochrana, František & Šumpíková, Markéta, 2021. "Stewardship and administrative capacity in green public procurement in the Czech Republic: Evidence from a large-N survey," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 33.
    17. Antonovaa, Maria & Nilsson, Jerker & Potapova, Aleksandra, 2022. "Obstacles for Agricultural Cooperatives in Russia: The Competencies of Experts," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 13(03), September.
    18. Taras Gagalyuk & Vladislav Valentinov & Franziska Schaft, 2018. "The Corporate Social Responsibility of Ukrainian Agroholdings: the Stakeholder Approach Revisited," Systemic Practice and Action Research, Springer, vol. 31(6), pages 675-698, December.
    19. Iliopoulos, Constantine & Valentinov, Vladislav, 2018. "Member heterogeneity in agricultural cooperatives: A systems-theoretic perspective," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 10(4), pages 1-22.
    20. Michael I.C. Nwogugu, 2019. "Complex Systems, Multi-Sided Incentives and Risk Perception in Companies," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-44704-3, October.
    21. van Assche, Kristof & Valentinov, Vladislav & Verschraegen, Gert, 2022. "Adaptive governance: Learning from what organizations do and managing the role they play," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 51(5), pages 1738-1758.
    22. Vladislav Valentinov & Martina Bolečeková & Gabriela Vaceková, 2017. "The Nonprofit Response to the Migration Crisis: Systems-Theoretic Reflections on the Austrian and Slovak Experiences," Systemic Practice and Action Research, Springer, vol. 30(6), pages 651-661, December.

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    More about this item

    Keywords

    Theory of the firm; Niklas Luhmann; Systems theory; Cooperatives; Non-profit organisations;
    All these keywords.

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General

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