Authority in the Context of Distributed Knowledge

The notion of distributed knowledge is increasingly often invoked in discussions of economic organization. In particular, the claim that authority is inefficient as a means of coordination in the context of distributed knowledge has become widespread. However, very little analysis has been dedicated to the relation between economic organization and distributed knowledge. In this paper, we concentrate on the role of authority as a coordination mechanism under conditions of distributed knowledge, and also briefly discuss other issues of economic organization. We clarify the meanings of authority and distributed knowledge, and criticize the above claim by arguing that authority may be a superior mechanism of coordination under distributed knowledge. We also discuss how distributed knowledge influences the boundaries of firms. Our arguments rely on insights in problem-solving and on ideas from organizational economics.Distributed knowledge, existence of authority, problem-solving, the boundaries of the firm

Understanding Ownership Residual Rights of Control and Appropriable Control Rights

We discuss the notion of ownership in economics, taking our point of departure in the Grossman-Hart-Moore property rights approach. We criticize the exclusive identification of ownership with residual rights to control in this approach, and argue that economic organization may be rendered determinate under complete contracting (contrary to the GHM approach). Crucially, we argue that under complete contracting, some control rights may be appropriable because of measurement and enforcement costs. This holds the key to a theory of ownership that is not dependent on the notion of residual rights to control, but rather relies on appropriable control rights. However, the two perspectives may be complementary rather than rival.Ownership, property rights, complete and incomplete contracts

Organizing Economic Experiments The Role of Firms

Many economists, including Austrian economists, have argued that the market process is essentially an experimental process. We briefly try to clarify this conceptualization, and then argue that we may understand the firm in much the same light. A basic view of the firm as an experimental entity is derived, drawing on property rights insights.The theory of the firm, Austrian economics, property rights

Creating, Capturing and Protecting Value A Property Rights-based View of CompetitiveStrategy

This paper develops a property rights-based view of strategy (the “PRV”). A property right (or economic right) is an individual’s net valuation, in expected terms, of the ability to directly consume the services of an asset (including, e.g., a monopoly position) or consume it indirectly through exchange. Resources expended on exchanging, protecting and capturing such rights are transaction costs; thus, we directly link property rights, transaction costs, and economic value. We assume that all relevant exchange is costly and that all agents maximize their property rights. This implies that economizing with transaction costs may be a distinct source of value, and potentially of sustained competitive advantage. Moreover, strategizing may be understood as revolving around influencing impediments (i.e., transaction costs) to value creation. Expectations and contracting also become crucial parts of processes of creating, protecting and capturing value. We use these insights to derive a number of refutable propositions, and argue that key insights from both industrial organization economics and the resource-based view are consistent with the PRV.Property rights, transaction costs, industrial organization

Equilibrium vs Evolution in the Resource-Based Perspective The Conflicting Legacies of Demsetz and Penrose

This paper argues that not only Edith Penrose, but also Harold Demsetz should be seen as a dominant source of inspiration for RBP scholars, that these two crucial influences hold different and even conflicting views of the economic process, and that they helped found different research areas and research approaches within the RBP. Based on this discussion, the paper argues that the conflicting legacies of Penrose and Demsetz threathen the coherence of the RBP, that a central problem in the RBP is the lack of understanding of the process of resource-creation which tends to give the perspective a retrospective character, but that work on technological innovation and change, framed in the broader theoretical context of Austrian and evolutionary economics, may help remedy this shortcoming.Evolutionary economics, competences, ressource-based perspective

Original and Derived Judgment An Entrepreneurial Theory of Economic Organization

Recent work links entrepreneurship to the economic theory of firm using the Knightian concept of entrepreneurship as judgment. When judgment is complementary to other assets, and these assets or their services are traded in well-functioning markets, it makes sense for entrepreneurs to hire labor and own assets. The entrepreneur’s role, then, is to arrange or organize the human and capital assets under his control. We extend this Knightian concept of the firm by developing a theory of delegation under Knightian uncertainty. What we call original judgment belongs exclusively to owners, but owners may delegate a wide range of decision rights to subordinates, who exercise derived judgment. We call these employees “proxy-entrepreneurs,” and ask how the firm’s organizational structure — its formal and informal systems of rewards and punishments, rules for settling disputes and renegotiating agreements, means of evaluating performance, and so on — can be designed to encourage forms of proxy-entrepreneurship that increase firm value while discouraging actions that destroy value. Building on key ideas from the entrepreneurship literature, Austrian economics, and the economic theory of the firm we develop a framework for analyzing the tradeoff between productive and destructive proxy-entrepreneurship. We link this analysis to the employment relation and ownership structure, providing new insights into these and related issues in the economic theory of the firm.Judgment, entrepreneur, delegation, employment relation, ownership

Austrian and Post-Marshallian EconomicsThe Bridging Work of George Richardson

Austrian and post-Marshallian economics share a number of concerns, such as a basic subjecticist stance and an emphasis on the importance of inquiry into the disequilibrium market process. This paper details similarities and differences between these two bodies of thought, and argue that a closer liaison is possible. George Richardson's work is presented as a possible bridge, since his work incorporates both Austrian and post-Marshallian elements. The paper ends by sketching a combined Austrian and post-Marshallian approach to the firm.Austrian economics, post-Marshallian economics, George Richardson, the theory of the firm

Developments in the large angle oblique jet impingement flow investigation

Single-wire (hot-wire) measurements are presented of the mean velocity and turbulence quantities near the impact plate for a 45-degree impingement flow responsible for acoustic noise production. These results are summarized along with the conclusions which shaped the subsequent direction of the study of large angle oblique jet impingement flow. The development of a unique signal processing circuit for finding the instantaneous transverse vorticity from an array of four hot-wires is discussed

Understanding Leadership A Coordination Theory

Important aspects of leadership behavior can be rendered intelligible through a focus on coordination games. The concept of common knowledge is shown to be particularly important to understanding leadership. Thus, leaders may establish common knowledge conditions and assist the coordination of strategies in this way, or make decisions in situations where coordination problems persist in spite of common knowledge.Game theory, management, organization