The Essence of the Modern Corporation: Markets, Strategic Decision‐Making and the Theory of the Firm

Abstract

Following Coase’s fundamental concern with planning, in this paper we highlight strategic decision‐making as important for distinguishing the essence of the modern large corporation. It is consistent with industrial organization analysis of industries yet provides a novel starting point for the theory of the firm. We suggest different boundaries to the organization compared with those identified elsewhere, and whereas others peering into the black box of Walrasian theory merely see more of what is on the outside, we see transactions within and without the firm as fundamentally different. The analysis recognizes Pareto inefficiencies but concludes with an optimistic vision for economic policy.

The Internal and External Governance of Cooperatives: Membership and Consistency of Values

“…The distribution of the residual rights to control network resources clearly places controlled companies in a subordinate position. In line with the strategic governance approach earlier developed by Cowling and Sugden (1998), we suggest, in particular, that the extent to which the power differential is used to take strategic decisions despite the desires of the subordinates provides an indication of the consistency between the objectives of the core's membership on the one hand, and the values of cooperation more generally on the other. The tension would be between the interests of the core's members and the values embodied by the core's network strategy.…”

Why Social Enterprises are Asking to Be Multi-Stakeholder and Deliberative: An Explanation Around the Costs of Exclusion

“…It follows that exclusive production governance generates uneven distribution of rights and opportunities at a broad societal scale and across regions, in terms of income, status, authority, embedded knowledge and opportunities (Hymer, 1972;Marglin, 1974;Sugden, 1994, 1998;Sacchetti, 2004). Cowling and Sugden (1994), as highlighted earlier, identify societal costs with the "strategic failure" of exclusive production governance. Consistently with these concerns, Meade (1979) centres his definition of externalities on the exclusion of the affected parties in the decisions that led to the external economy or diseconomy 4 .…”

“…It follows that the governance question asks also how community and business stakeholders participate and on what terms (Gereffi, 1994;Cowling and Sugden, 1998;Kaplinsky, 2000;Cornforth, 2012;). This is because governance identifies who is responsible for the identification of needs, for the design of services, for surplus distribution, for defining the inter-organisational division of labour along the social value chain.…”

“…Cowling and Sugden (1998) called this specific problem "strategic failure". Strategic failure occurs when the aims and goals of production (whatever the ownership) are not aligned with the interests of other stakeholders and with the development aims of communities more broadly.…”

Creativity and socio‐economic development: space for the interests of publics

“…The focus on corporations and strategy is taken up in Cowling and Sugden (1998a), grounding analysis in Coase (1937Coase ( , 1991 but critiquing mainstream economic theories, including the transactions cost approach that rests on Williamson (1975).…”