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Norms and the Theory of the Firm

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  • Oliver Hart

Abstract

This paper discusses some of the attempts economists have made in the last ten years or so to integrate norms into the theory of the firm. The paper argues that (a) although norms are undoubtedly very important both inside and between firms, incorporating them into the theory has been very difficult and is likely to continue to be so in the near future; (b) so far norms have not added a great deal to our understanding of such issues as the determinants of firm boundaries (the 'make-or-buy' decision) that is, at this point a norm-free theory of the firm and a norm-rich theory of the firm don't seem to have very different predictions.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8286.

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Date of creation: May 2001
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Publication status: published as Brousseau, Eric and Jean-Michel Glachant (eds.) The economics of contracts: Theories and applications. Cambridge, New York, and Melbourne: Cambridge University Press, 2002.
Handle: RePEc:nbr:nberwo:8286

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  1. Steve Tadelis, 1997. "What's in a Name? Reputation as a Tradeable Asset," Working Papers 97033, Stanford University, Department of Economics.
  2. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-38, May.
  4. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, 1999. "What Determines Firm Size?," NBER Working Papers 7208, National Bureau of Economic Research, Inc.
  5. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  6. Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1846, Harvard - Institute of Economic Research.
  7. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
  8. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  10. George Baker & Robert Gibbons & Kevin J. Murphy, 1993. "Subjective Performance Measures in Optimal Incentive Contracts," NBER Working Papers 4480, National Bureau of Economic Research, Inc.
  11. Tirole, Jean, 1994. ""A Theory of Collective Reputations" with Applications to the Persistence of Corruption and to Firm Quality," IDEI Working Papers 38, Institut d'Économie Industrielle (IDEI), Toulouse.
  12. Raghuram G. Rajan & Luigi Zingales, . "Power in a Theory of the Firm," CRSP working papers 335, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  13. Ernst Fehr & Simon Gaechter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," CESifo Working Paper Series 336, CESifo Group Munich.
  14. Posner, Richard A, 1997. "Social Norms and the Law: An Economic Approach," American Economic Review, American Economic Association, vol. 87(2), pages 365-69, May.
  15. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, September.
  16. Holmstrom, Bengt, 1999. "The Firm as a Subeconomy," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 74-102, April.
  17. Maija Halonen, 2002. "Reputation And The Allocation Of Ownership," Economic Journal, Royal Economic Society, vol. 112(481), pages 539-558, July.
  18. George P. Baker & Thomas N. Hubbard, 2000. "Contractibility and Asset Ownership: On-Board Computers and Governance in U.S. Trucking," NBER Working Papers 7634, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Oliver Gürtler, 2008. "Implicit contracting with a (potentially) reliable agent," Journal of Economics, Springer, vol. 94(2), pages 177-189, July.
  2. Brown, Martin & Falk, Armin & Fehr, Ernst, 2002. "Contractual Incompleteness and the Nature of Market Interactions," CEPR Discussion Papers 3272, C.E.P.R. Discussion Papers.
  3. Kaufman, Bruce E., 2003. "The organization of economic activity: insights from the institutional theory of John R. Commons," Journal of Economic Behavior & Organization, Elsevier, vol. 52(1), pages 71-96, September.
  4. Oriana Bandiera (STICERD & LSE, 2004. "Relative and Absolute Incentives: Evidence on Worker Productivity," Econometric Society 2004 North American Summer Meetings 277, Econometric Society.
  5. Huck, Steffen & Kübler, Dorothea & Weibull, Jörgen, 2001. "Social norms and optimal incentives in firms," Working Paper Series in Economics and Finance 466, Stockholm School of Economics.
  6. Kvaløy, Ola & Olsen, Trond E., 2008. "Relative performance evaluation, agent hold-up and firm organization," Journal of the Japanese and International Economies, Elsevier, vol. 22(2), pages 229-241, June.
  7. Nicolai J. Foss & Peter G. Klein, 2005. "The Theory of the Firm and Its Critics A Stocktaking and Assessment," DRUID Working Papers 05-03, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  8. Randolph Sloof & Joep Sonnemans, 2009. "The Interaction between Explicit and Relational Incentives: An Experiment," Tinbergen Institute Discussion Papers 09-030/1, Tinbergen Institute.
  9. Huck, Steffen & Kübler, Dorothea & Weibull, Jörgen, 2010. "Social Norms and Economic Incentives in Firms," IZA Discussion Papers 5264, Institute for the Study of Labor (IZA).
  10. Kvaløy, Ola, 2008. "Do norms matter for firm boundaries?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(3), pages 969-975, June.
  11. Iqbal, Zamir & Mirakhor, Abbas, 2004. "Stakeholders Model of Governance in Islamic Economic System," MPRA Paper 56027, University Library of Munich, Germany.
  12. Kragl, Jenny & Schmid, Julia, 2009. "The impact of envy on relational employment contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 72(2), pages 766-779, November.
  13. Dragone, Davide & Viviani, Michele, 2007. "Cultura Organizzativa e Sostenibilita' della Governance Multistakeholder," AICCON Working Papers 40-2007, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
  14. Paul H. Jensen & Robin E. Stonecash, 2004. "The Efficiency of Public Sector Outsourcing Contracts: A Literature Review," Melbourne Institute Working Paper Series wp2004n29, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  15. Sacco, Pier Luigi & Viviani, Michele, 2005. "Corporate Social Responsibility: theoretical perspectives in the Italian Debate," AICCON Working Papers 11-2005, Associazione Italiana per la Cultura della Cooperazione e del Non Profit, revised 03 Feb 2007.
  16. P. L. Sacco & M. Viviani, 2006. "La responsabilita' sociale d'Impresa - prospettive teoriche nel dibattito italiano," Working Papers 578, Dipartimento Scienze Economiche, Universita' di Bologna.

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