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How Does Opportunistic Behavior Influence Firm Size?

  • Christian Cordes

    ()

  • Peter J. Richerson
  • Richard McElreath
  • Pontus Strimling

This paper relates firm size and opportunism by showing that, given certain behavioral 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.

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Paper provided by Philipps University Marburg, Department of Geography in its series Papers on Economics and Evolution with number 2006-18.

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Date of creation: Nov 2006
Date of revision:
Handle: RePEc:esi:evopap:2006-18
Contact details of provider: Postal: Deutschhausstrasse 10, 35032 Marburg
Phone: 064212824257
Fax: 064212828950
Web page: http://www.uni-marburg.de/fb19/
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  1. Williamson, Oliver E, 1981. "The Modern Corporation: Origins, Evolution, Attributes," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1537-68, December.
  2. Witt, Ulrich, 2000. "Changing Cognitive Frames--Changing Organizational Forms: An Entrepreneurial Theory of Organizational Development," Industrial and Corporate Change, Oxford University Press, vol. 9(4), pages 733-55, December.
  3. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
  4. Christian Cordes, 2004. "Veblen's "Instinct of Workmanship," its Cognitive Foundations, and Some Implications for Economic Theory," Papers on Economics and Evolution 2004-01, Philipps University Marburg, Department of Geography.
  5. Coase Ronald, 1991. "The Institutional Structure of Production," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 2(4), pages 10, December.
  6. Ernst Fehr & Simon Gaechter, 1999. "Cooperation and Punishment in Public Goods Experiments," CESifo Working Paper Series 183, CESifo Group Munich.
  7. Henrich, Joseph, 2004. "Cultural group selection, coevolutionary processes and large-scale cooperation," Journal of Economic Behavior & Organization, Elsevier, vol. 53(1), pages 3-35, January.
  8. Audretsch, David B, 1997. "Technological Regimes, Industrial Demography and the Evolution of Industrial Structures," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 49-82.
  9. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  10. Bruno S. Frey & Reto Jegen, 2000. "Motivation Crowding Theory: A Survey of Empirical Evidence," CESifo Working Paper Series 245, CESifo Group Munich.
  11. Rubin, Paul H., 1982. "Evolved ethics and efficient ethics," Journal of Economic Behavior & Organization, Elsevier, vol. 3(2-3), pages 161-174.
  12. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
  13. Williamson, Oliver E, 1971. "The Vertical Integration of Production: Market Failure Considerations," American Economic Review, American Economic Association, vol. 61(2), pages 112-23, May.
  14. U. Witt, 2005. "Firms as Realizations of Entrepreneurial Visions," Papers on Economics and Evolution 2005-10, Philipps University Marburg, Department of Geography.
  15. Oliver E. Williamson, 2002. "The Theory of the Firm as Governance Structure: From Choice to Contract," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 171-195, Summer.
  16. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
  17. Joseph E. Harrington & Jr., 1999. "Rigidity of Social Systems," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 40-64, February.
  18. Eshel, I. & Samuelson, L. & Shaked, A., 1996. "Altruists, Egoists and Hooligans in a Local Interaction Model," Working papers 9612r, Wisconsin Madison - Social Systems.
  19. Witt, Ulrich, 1998. "Imagination and leadership - The neglected dimension of an evolutionary theory of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 35(2), pages 161-177, April.
  20. Eshel, Ilan & Samuelson, Larry & Shaked, Avner, 1998. "Altruists, Egoists, and Hooligans in a Local Interaction Model," American Economic Review, American Economic Association, vol. 88(1), pages 157-79, March.
  21. Boyd, Robert & Richerson, Peter J., 1980. "Sociobiology, culture and economic theory," Journal of Economic Behavior & Organization, Elsevier, vol. 1(2), pages 97-121, June.
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