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How does opportunistic behavior influence firm size? An evolutionary approach to organizational behavior

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  • CORDES, CHRISTIAN
  • RICHERSON, PETER
  • MCELREATH, RICHARD
  • STRIMLING, PONTUS

Abstract

This paper relates firm size and opportunism by showing that, given certain behavioural dispositions of humans, the size of a profit-maximizing firm can be determined by cognitive aspects underlying firm-internal cultural transmission processes. We argue that what firms do better than markets – besides economizing on transaction costs – is to establish a cooperative regime among its employees that keeps in check opportunism. A model depicts the outstanding role of the entrepreneur or business leader in firm-internal socialization processes and the evolution of corporate cultures. We show that high opportunism-related costs are a reason for keeping firms’ size small.

Suggested Citation

  • Cordes, Christian & Richerson, Peter & Mcelreath, Richard & Strimling, Pontus, 2011. "How does opportunistic behavior influence firm size? An evolutionary approach to organizational behavior," Journal of Institutional Economics, Cambridge University Press, vol. 7(1), pages 1-21, March.
    • Handle: RePEc:cup:jinsec:v:7:y:2011:i:01:p:1-21_00
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    Cited by:

    1. Heinrich, Torsten, 2015. "Evolution-Based Approaches in Economics and Evolutionary Loss of Information," MPRA Paper 68384, University Library of Munich, Germany.
    2. Christian Cordes & Stephan Müller & Georg Schwesinger & Sarianna M. Lundan, 2022. "Governance structures, cultural distance, and socialization dynamics: further challenges for the modern corporation," Journal of Evolutionary Economics, Springer, vol. 32(2), pages 371-397, April.
    3. Christian Cordes, 2019. "The promises of a naturalistic approach: how cultural evolution theory can inform (evolutionary) economics," Journal of Evolutionary Economics, Springer, vol. 29(4), pages 1241-1262, September.
    4. Christian Balcells, 2022. "Determinants of firm boundaries and organizational performance: an empirical investigation of the Chilean truck market," Journal of Evolutionary Economics, Springer, vol. 32(2), pages 423-461, April.
    5. Christian Cordes & Peter Richerson & Georg Schwesinger, 2014. "A corporation’s culture as an impetus for spinoffs and a driving force of industry evolution," Journal of Evolutionary Economics, Springer, vol. 24(3), pages 689-712, July.
    6. Joseph Bozorgmehr, 2012. "Natural selection as a paradigm of opportunism in biology," Journal of Bioeconomics, Springer, vol. 14(1), pages 61-75, April.

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