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"Coase vs Hayek": Economic Organization in the Knowledge Economy

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Author Info
Nicolai J. Foss

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Abstract

Many writers argue that economic organization will be strongly transformed in the emerging knowledge economy. Thus, authority relations will wither, or at least undergo significant changes; legal and ownership-based definitions of the boundaries of firms will become irrelevant; and there will be very few or no constraints on the set of feasible combinations of coordination mechanisms, as manifested in the increasing proliferation of “new organizational forms.” The increased importance of specialist knowledge and the strategic imperative of rapidly adjusting to constantly changing contingencies mean that firms lose power over employees and that knowledge-based networks that cut across the boundaries of firms become as, or more, important as intra-firm relations. The present paper critically deals with these claims, beginning from the basic idea that they may be analyzed as turning on the implications for the Coasian firm of the Hayekian notion that the distributed and subjective character of economically relevant knowledge is a strongly binding constraint on the use of planned coordination. Based on organizational economics, it is argued that efficiency reasons for the existence of authority under Hayekian distributed knowledge may be given; that the increasing importance of knowledge assets does not render legal and ownership-based notions of the boundaries of the firm irrelevant; and that coordination mechanisms will also cluster in certain, predictable combinations in the emerging knowledge economy.

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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 2001-6.

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Handle: RePEc:ivs:iivswp:01-08

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  11. Nicolai J Foss, . "Internal Disaggregation in Oticon: Interpreting and Learning from the Rise and Decline of the Spaghetti Organization," IVS/CBS Working Papers 01-1, Department of Industrial Economics and Strategy, Copenhagen Business School. [Downloadable!]
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  35. Keld Laursen, 2002. "The Importance of Sectoral Differences in the Application of Complementary HRM Practices for Innovation Performance," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 9(1), pages 139-156, February. [Downloadable!] (restricted)
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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. Kirsten Foss & Nicolai J. Foss, 2003. "Authority in the Context of Distributed Knowledge," DRUID Working Papers 03-08, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
  2. Vitor Braga, 2004. "Business networking for SMEs as a means to promote regional competitiveness: A Theoretical Framework," ERSA conference papers ersa04p455, European Regional Science Association. [Downloadable!]
  3. Paul N. Gooderham & Svein Ulset, 2002. "'Beyond the M-form': Towards a Critical Test of the New Form," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 9(1), pages 117-138, February. [Downloadable!] (restricted)
  4. Geoffrey M. Hodgson, 2002. "The Legal Nature of the Firm and the Myth of the Firm-Market Hybrid," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 9(1), pages 37-60, February. [Downloadable!] (restricted)
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