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How Does Opportunistic Behavior Influence Firm Size?

Author

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  • Christian Cordes

    ()

  • Peter J. Richerson
  • Richard McElreath
  • Pontus Strimling

Abstract

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.

Suggested Citation

  • Christian Cordes & Peter J. Richerson & Richard McElreath & Pontus Strimling, 2006. "How Does Opportunistic Behavior Influence Firm Size?," Papers on Economics and Evolution 2006-18, Philipps University Marburg, Department of Geography.
  • Handle: RePEc:esi:evopap:2006-18
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    References listed on IDEAS

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    Cited by:

    1. 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.

    More about this item

    Keywords

    Theory of the Firm; Transaction Cost Economics; Cultural Evolution; Opportunism; Cooperation Length 21 pages;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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