Values and Governance Systems

Abstract

Cooperative behavior as well as other cultural rules and values are made explicit in organizational units that procure and provide a common service. The common service is procured by a club, which consists of a user-value function, a representation governance, and a budget-allocation function. The common service is provided by a firm, which consists of a value-production function, an implementation governance, and a remuneration function. They extend the concepts of the consumer and the producer in neoclassical theory. The functions mentioned are determined by cooperative games. A governance is represented by a structure of principal-agent relations. The representation governance is a bottom-up hierarchy, empowered by the members of the club. The implementation governance is a top-down hierarchy, empowered by the governor of the firm. The optimal size of the club organization and the firm organization in a competitive environment is determined under certain conditions. This description of a club and a firm allows characterization of some cultural dimensions in the society. For one such cultural dimension, viz. the degree of collectivism in society, the impact on the optimal organization is shown.Governance;cooperation;hierarchy;club;firm;institution;service economy;values;culture;organization