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Innovative activity, substantive uncertainty and the theory of the firm

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  • Mario Morroni

Abstract

The inability to predict the future impact of innovations generates surprise and inconsistency of expectations, thereby giving rise to substantive uncertainty. In this paper I concentrate the analysis on organisational response to unforeseen transformations of environmental conditions stemming from innovative activity. Under substantive uncertainty, the capacity to overcome internal resistance to change and to exploit the flexibility characteristics of organisational coordination are both crucial factors in determining a competitive advantage of business organisations. Within organisations, flexibility is mainly obtained by means of reserves (such as warehouses and capabilities), which may be useful to face unpredicted contingencies, and long-term relational agreements that allow mediation among the organisations stakeholders, provision of incentives, simplification and learning. The paper is structured as follows. The first section is dedicated to the relationship between innovative activity and substantive uncertainty. Sections 2 and 3 address the rigidity and flexibility elements that characterise business organisations consisting in firms or hybrid forms. Finally, Section 4 focuses on the main implications for the theory of the firm arising from the coexistence of different degrees of uncertainty and kinds of rationality, according to the level of agents abilities in relation to the specific problem to be faced.

Suggested Citation

  • Mario Morroni, 2006. "Innovative activity, substantive uncertainty and the theory of the firm," Discussion Papers 2006/59, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  • Handle: RePEc:pie:dsedps:2006/59
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    Cited by:

    1. Fanti, Luciano & Gori, Luca, 2010. "Child policy solutions for the unemployment problem," Economics Letters, Elsevier, vol. 109(3), pages 147-149, December.
    2. Luciano Fanti & Luca Gori, 2009. "Longevity, fertility and PAYG pension systems sustainability," Discussion Papers 2009/77, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    3. Luciano Fanti & Luca Gori, 2012. "Endogenous Lifetime in an Overlapping-Generations Small Open Economy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 68(2), pages 121-152, June.
    4. Morroni, Mario, 2014. "Production of commodities by means of processes," Structural Change and Economic Dynamics, Elsevier, vol. 29(C), pages 5-18.
    5. Luciano Fanti & Luca Gori, 2011. "On economic growth and minimum wages," Journal of Economics, Springer, vol. 103(1), pages 59-82, May.
    6. Manuela Gussoni - Andrea Mangani, 2009. "The impact of public funding for innovation on firms' R&D investments: Do R&D cooperation and appropriability matter?," Discussion Papers 2009/90, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    7. Lorenzo Corsini & Pier Mario Pacini & Luca Spataro, 2010. "Workers' Choice on Pension Schemes: an Assessment of the Italian TFR Reform Through Theory and Simulations," Discussion Papers 2010/96, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    8. Lorenzo Corsini & Elisabetta Olivieri, 2008. "Technological Change and the Wage Differential between Skilled and Unskilled Workers: Evidence from Italy," Discussion Papers 2008/73, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    9. Luca Gori, 2009. "Endogenous fertility, family policy and multiple equilibria," Discussion Papers 2009/79, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    10. Luciano Fanti & Luca Gori, 2009. "Endogenous fertility, endogenous lifetime and economic growth: the role of health and child policies," Discussion Papers 2009/91, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    11. Maurizio Lisciandra, 2007. "The Role of Reciprocating Behaviour in Contract Choice," Discussion Papers 2007/65, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    12. Luciano Fanti & Luca Gori, 2008. "PAYG pensions and economic cycles: exogenous versus endogenous fertility," Discussion Papers 2008/75, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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