Christos N. Pitelis

Perspective---The Interdependence of Private and Public Interests

The predominant focus in research on organizations is on private or public institutions without consistent consideration of their interdependencies. The emphasis in scholarship on private or public interests has strengthened as disciplinary and professional knowledge has deepened: Management scholars, for example, tend to consider the corporation as the unit of analysis, whereas scholars of public policy often analyze governmental, multilateral, community, and nonprofit organizations. This article advocates a partial merging of these research agendas on the grounds that private and public interests cannot be fully understood if they are conceived independently. We review three major areas of activity today in which public and private interests interact in complex ways and maintain that current theories of organization science can be deployed to understand these interactions better. We also suggest that theories of public-private interaction require development and describe a concept called global sustainable value creation, which may be used to identify organizational and institutional configurations and strategies conducive to worldwide, intertemporal efficiency and value creation. We conclude that scholarship on organizations would advance if private-public interactions were evaluated by the criterion of global sustainable value creation, and we identify organizational research opportunities that jointly consider public and private interests.

The Co-Evolution of Organizational Value Capture, Value Creation and Sustainable Advantage

Despite much progress, scholarship on organizations and strategic management remains unduly reliant on economic models such as the industrial organization (IO) market structure-based analysis. The focus of such models is on price-output determination by firms and the economy-wide efficient allocation of scarce resources, under conditions of full knowledge and certainty. This limits their usefulness for students of organizations who have wider concerns and also focus on organizations, as opposed to just markets. In this article, we aim to provide a framework for analysing the most fundamental, even existential, issue of organization studies and strategic management scholarship. This is whether and how the pursuit of value capture from economic agents who perceive that they possess appropriable value creating advantages, capabilities and action potential, can motivate the emergence of organizations and their strategies and actions intended to capture socially co-created value in conditions of real life. To do so, we explore (the co-evolution of) value capture and creation and their relationship to organizational sustainable advantage (SA). We delve into the nature, determinants and relationship between organizational value capture and creation and explore causal pathways, trade-offs and co-evolution, as well as vehicles through which SA can be effected in an evolving and uncertain environment. We also discuss implications for managerial practice, limitations and future research opportunities.

A Behavioral Resource-Based View of the Firm: The Synergy of Cyert and March (1963) and Penrose (1959)

Cyert and Marchs (1963) seminal behavioral theory is one of the two major economics-based theories of the firm that goes inside the “black box” (the firm)---the other being the contribution of Edith Penrose. The two theories have differences, but also similarities, and substantial scope for cross-fertilization that has gone unnoticed in the literature. In this paper, we try to integrate important ideas from both books, paying particular attention to the issue of “excess resources,” slack, and (intrafirm) conflict. We then build on the integrated framework by delving into the nature of intrafirm conflict and its relationship to the degree of intrafirm rivalry, as they may impact the possible use of slack by firms. We derive propositions common to the two theories and new ones of importance to our understanding of organizational growth and change.

Transaction Costs, Markets and Hierarchies

1. Transaction Costs, Markets and Hierarchies: Christos Pitelis (University of Cambridge). 2. The Nature and Role of Markets: Malcolm Sawyer (University of Leeds). 3. In the Beginning there were Markets?: Frederick Fourie (University of the DFS, South Africa). 4. Control, Markets and Firms: Keith Cowling and Robert Sugden (University of Birmingham). 5. Transaction Costs and the Evolution of the Firm: Geoffrey Hodgson (Newcastle Polytechnic). 6. The Appropriability Critique of Transaction Cost Economics: Gregory Dow (University of Alberta, Canada). 7. Power and Efficiency in the Firm: Paul Marginson (University of Warwick). 8. Transaction Costs,... and Revenues: Michael Dietrich (Newcastle Polytechnic). 9. Transaction Cost Economics and the State: William Dugger (DePaul University, Chicago). 10. Markets, Hierarchies and Markets Again: Steve Thompson and Mike Wright (University of Manchester and University of Nottingham). 11. Markets, False Hierarchies and the Role of Asset Specificity: Neil Kay (University of Strathclyde). 12. On Transactions (Costs) and Markets and (as) Hierarchies: Christos Pitelis (University of Cambridge).

Market and non-market hierarchies : theory of institutional failure

Institutions of capitalism and institutional crisis market and non-market hierarchies - the nature, objectives and evolution of firms competition, monopoly and prices the nature of the capitalist state theory of capitalist institutional crisis.

Transaction costs versus resource value

Two major advances in the theory of the firm and (micro)economics more generally are arguably transaction costs economics (TCE) and the theory of firm resources. TCE has originally been applied to the theory of the firm, but found applications in virtually all fields of economic inquiry. The theory of firm resources currently spans much of the industrial organisation (IO) and strategic management literature. In some fields, e.g. diversification, it has already acquired dominant status. Despite significant progress in TCE there still seem to remain significant unresolved issues. Indeed we claim that transaction cost economics fail to supply convincing answers to the issues of the nature of the firm (why do firms exist?), and their essence (running a business). It offers a partial explanation of the “nature” and little on the “essence”. The resource value view complements the nature side and goes far beyond on the essence issue. It provides a fruitful starting point for an integrative framework. This, we suggest, should be based on the resource value perspective story and craft (dynamic) transaction costs in the ensuing evolutionary tale.

Edith penrose: Pioneer of stakeholder theory

Abstract Edith Tilton Penroses theory of the growth of the firm was a rare attempt in economics to enter the “black ☐” of the firm. In going within the firm, Penroses theory expanded our understanding of the “nature of the firm” (particularly the employment relationship) and its “essence”, that is, “running a business”. It has enhanced our understanding of the stakeholders inside and outside the firm, thus intra- and inter-firm relations. It further anticipated a number of recent developments in (strategic) management; notably the competence-based perspective, organisational learning and inter-firm networks.

Transaction Costs and the Historical Evolution of the Capitalist Firm

The aim of this paper is to critically assess the contribution of transaction costs economics (TCE) in explaining the nature of the firm. TCE suffers from conceptual problems and lacks a historical-evolutionary basis. The pursuit of a historically informed evolutionary perspective exposes the limits of TCE and points to the need for a synthetic, integrative framework. Transaction costs economics dates back to Ronald Coases 1937 classic article. There, Coase claimed that given markets, firms should not exist in the absence of inherent market failures related to, what we call today, transaction costs. Such are costs of measurement, information, bargaining, contracting, enforcing, and policing agreements. Following O.E. Williamsons [1975] now classic book, these costs can be attributed to bounded rationality, opportunism, and asset specificity. The internalization of (imperfect) markets by firms (hierarchies) is said to increase overall efficiency. Firms are the result of a contractual arrangement between those involved in transactions. Removing market inefficiency is seen as both the reason for and effect of firms. Given costs of hierarchy (organization, management costs), the boundary of the firm is defined as being where an extra transaction can take place equally efficiently by organizing this transaction by the market or another firm. Accordingly, the observed market-hierarchy mix enhances overall efficiency. Market internalization, due to transaction costs, can also explain the evolution and strategies of firms, notably vertical integration, the M-form organization, the conglomerate,

Monetary Policy and the Distribution of Income: Evidence for the United States and the United Kingdom

The shift in the emphasis of macroeconomic policy during the late 1970s and early 1980s toward combating inflation rather than maintaining full employment and the associated tight monetary policies fostered by the majority of the advanced industrialized countries, caused interest rates to increase to unprecedented heights. Income distribution and unemployment are among the economic variables that may have been mostly affected by the new, restrictive menu of macroeconomic policy. Yet, little attention has been paid to the potentially profound effects of monetary policy and high interest rates on the functional distribution of income. 1 In this paper we set out to illuminate the issues surrounding the effects of monetary policy on changes in the income shares of industrial capital, financial capital, and labor in the nonfinancial corporate sector, in the United States and the United Kingdom? The second section develops a post-Keynesian-Kaleckian perspective of income distribution and a mechanism to show the way in which monetary policy might affect the distribution of income between the three aforementioned income groups.

Industrial Strategy: For Britain, in Europe and the World

Aims to examine the issue of industrial strategy (IS), paying particular attention to the case of Britain. Sets out to assess the possibility and nature of an industrial strategy for Britain, in Europe, and within the global scene, taking into account the world we live in as we see it. Accordingly, the perspective is driven and shaped by a quest for a realistic, feasible and sustainable industrial strategy. In order to achieve these objectives, first examines the theoretical arguments behind much of British, and more generally, Western industrial policies. Following this, outlines and assesses British industrial policy post-Second World War then compares and contrasts British industrial policy with that of Europe, the USA, Japan and the newly industrialized countries. Then examines recent developments in economics and management which may explain the “Far Eastern” miracle, and points to the possibility of a successful, narrowly self-interested, IS for Europe and Britain, based on the lessons from (new) theory and international experience. To assess what is possible, develops a theoretical framework linking firms in their roles as consumers and/or electors. This hints at the possibilities and limits of feasible policies. All these ignore desirability which, in the authors view, should be seen in terms of distributional considerations, themselves contributors to sustainability. Accordingly, discusses a desirable industrial strategy for Britain in Europe which accounts for distributional considerations, and goes on to examine its implications for the issue of North-South convergence. Concludes by pointing to the limitations of the analysis and to directions for developments.