Neil Kay

Reappraising the Nature of the Firm: The Role and Influence of Lexical and Structural Ambiguity

In this paper it is argued that lexical ambiguity (where a word can have two or more separate meanings) and structural ambiguity (where a phrase can have two or more separate meanings) have profoundly affected the development of the theory of the firm and the economics of organization. We focus particularly on Coases agenda as to what constitutes the nature of the firm, and argue that intellectual resources have been misallocated in this field of inquiry because of endemic problems of lexical and structural ambiguity. We suggest how the agenda could be restated and redirected. It is concluded that resource-based economics, organizational decision theory and transaction cost analysis (in the broadest sense) should not be seen as potentially competing perspectives or frameworks in analysis of the nature of the firm, but instead as valuable and complementary tools for such analysis.

Corporate decision-making for allocations to research and development

Abstract The analysis developed here suggests that conventional project based approaches to R & D budget determination do not provide a satisfactory explanation of the actual behaviour of typical large modern corporations. An alternative frame of reference for modelling such behaviour based on a gestalt interpretation is suggested and an examination conducted of differences in corporate R & D budgeting techniques described in a number of studies. It is suggested that the frame of reference developed here provides a useful explanation of differences in budgeting conventions. The interpretation developed is also used to analyse variation in industrial innovative activity. Studies in this area have frequently been based on the concept of rival firms matching each others R & D budgets. Models based on this concept have produced conflicting evidence in this respect. It is suggested here that an alternative approach based on a gestalt interpretation may provide a rather better explanation.

The Evolution of Co‐operation, Pairings and Networks

Abstract In this paper we develop an approach that may be helpful in analysing a variety of issues related to the evolution of corporate activity. We analyse the firm as an integrated system concerned with the management and organisation of internal and external linkages between businesses, with the emergence of co‐operative behaviour as an endogenous feature of growing systems. It is argued that such a perspective can help illuminate a number of topics relating to the theory of the firm, including its boundaries and the mode of co‐ordination of economic activity, particularly the choice between integration and co‐operative modes of operation.

The Nature of the Firm

In this chapter we shall be concerned with the central problem of the theory of the firm; namely that it does not work. This problem appears less one of poor maintenance or temporary breakdown, more one of fundamentally faulty design. The general malfunctioning of this theory when faced with empirical questions is clearly evident in industrial organisation, the applied field which the theory of the firm should naturally serve. Scherer (1970, p.3) points out that for industrial organisation problems, ‘the pure theories of firm and market behaviour have been bogged down on a broad front’. Nelson (1976, p.732) echoes Scherer and points the finger: ‘Industrial organisation is in deep intellectual trouble. The source of that trouble is that old textbook theory that we all know so well’, while Reekie (1979, p.1) endorses Nelson and complains glumly, ‘industrial organisation is a field of intellectual muddle’.