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Capabilities and Governance: The Rebirth of Production in the Theory of Economic Organization

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  • Langlois, Richard N
  • Foss, Nicolai J

Abstract

This paper argues that, since Ronald H. Coase's seminal 1937 paper on 'The Nature of the Firm,' the economics of organization has focused too exclusively on issues of incentive alignment and has ignored issues of imperfect knowledge in production. However, there is now emerging an approach to economic organization--which the authors call 'the capabilities approach.' They argue that the capabilities approach complements incentive-based theory (1) by considering the problems of imperfect knowledge in production as well as in governance and (2) by considering issues not only of incentive alignment but also of qualitative coordination among holders of specialized, distributed, and often tacit knowledge. Copyright 1999 by WWZ and Helbing & Lichtenhahn Verlag AG

Suggested Citation

  • Langlois, Richard N & Foss, Nicolai J, 1999. "Capabilities and Governance: The Rebirth of Production in the Theory of Economic Organization," Kyklos, Wiley Blackwell, vol. 52(2), pages 201-218.
  • Handle: RePEc:bla:kyklos:v:52:y:1999:i:2:p:201-18
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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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