The logic of the firm, the superfirm : organisational governance and substitution

• Main Author: Fu, G.
• Published: University of Cambridge 2000
• Subjects: 338.0068
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.599250

In study of economic organisations, four questions seem rudimentary: 1) Why do we need the organisation like the firm, instead of the market, in many circumstances? 2) What are the factors that determine the inner structure of the firm ? Or, in what respect the firm is endowed with greater capacities than the market ? 3) What are the necessary and sufficient conditions of organisational substitution in the real world ? 4) Is the theory of organisational substitution, deriving from Coase's theory of the firm, applicable to analysis of economic reform under way in East Europe and the former Soviet Union (EEFSU) and China, and helpful to explain the consequent divergence in economic performance among these nations? Focusing on the first two issues - - the <I>existence</I> and the <I>organisation</I> of the firm, part one explores the nature of the firm as a governance structure and the determinants of the structure. Considering organisational substitution as a social process of organisational transformation instead of simply a choice of organisation, part two sets out to find the factors that would incur transition costs, i.e. the costs of changing organisation throughout the process of transition. Positive transition costs explain the stability or persistence of organisation, and the co-existence of efficient with inefficient organisations, etc. Assuming there are alternative approaches to reform, part three centres on the issue concerning rationality of approach to reform, specifying why and how rational choice of approach to reform has the purpose and effect of economising on transition costs, based on a comparative study of the "big bang" reform in EEFSU and the "gradual" reform in China, and a simulation of the evolutionary process of China's "gradual" transition to a market economy from the perspective of resource allocation.