This book brings together classic writings on the economic nature and organization of firms, including works by Ronald Coase, Oliver Williamson, and Michael Jensen and William Meckling, as well as more recent contributions by Paul Milgrom, Bengt Holmstrom, John Roberts, Oliver Hart, Luigi Zingales, and others. Part I explores the general theme of the firm's nature and place in the market economy; Part II addresses the question of which transactions are integrated under a firm's roof and what limits the growth of firms; Part III examines employer-employee relations and the motivation of labor; and Part IV studies the firm's organization from the standpoint of financing and the relationship between owners and managers. The volume also includes a consolidated bibliography of sources cited by these authors and an introductory essay by the editors that surveys the new institutional economics of the firm and issues raised in the anthology.
• Only collection of its kind to include classic articles such as Coase's 'The Nature of the Firm' and Alchian/Demsetz's 'Production, Information Costs, and Economic Organization' • Important contributions published as far back as 1776 and as recently as 2003 • Articles are accessible without knowledge of mathematical economic theory
Preface: reintroducing the economic nature of the firm; Part I. Within and among Firms: The Division of Labor: 1. From The Wealth of Nations Adam Smith; 2. From Capital Karl Marx; 3. From Risk, Uncertainty and Profit Frank Knight; 4. From The Modern Corporation and Private Property A. A. Berle and G. C. Means; 5. The use of knowledge in society Friedrich Hayek; 6. Corporate governance Luigi Zingales; Part II. The Nature of the Firm: 7. The nature of the firm Ronald Coase; 8. Vertical integration, appropriable rents, and the competitive contracting process Benjamin Klein, Robert Crawford and Armen Alchian; 9. The governance of contractual relations Oliver Williamson; 10. The limits of firms: incentive and bureaucratic features Oliver Williamson; 11. Bargaining costs, influence costs, and the organization of economic activity Paul Milgrom and John Roberts; 12. The boundaries of the firm revisited Bengt Holmstrom and John Roberts; Part III. The Employment Relation, the Human Factor and Internal Organization: 13. Production, information costs, and economic organization Armen Alchian and Harold Demsetz; 14. Contested exchange; new microfoundations for the political economy of capitalism Samuel Bowles and Herbert Gintis; 15. Understanding the employment relation: the analysis of idiosyncratic exchange Oliver Williamson, Michael Wachter and Jeffrey Harris; 16. Multitask principal-agent analyses: incentive contracts, asset ownership, and job design Bengt Holstrom and Paul Milgrom; 17. Work motivation Truman Bewley; 18. From Worker Participation John Pencavel; Part IV. Finance and the Control of the Firm: 19. Mergers and the market for corporate control Henry Manne; 20. Agency problems and the theory of the firm Eugene Fama; 21. Theory of the firm: managerial behavior, agency costs, and ownership structure Michael Jensen and William Meckling; 22. Organizational forms and investment decisions Eugene Fama and Michael Jensen; 23. The rise in managerial stock ownership Clifford G. Holderness, Randall S. Kroszner and Dennis P. Sheehan; 24. Executive compensation as an agency problem Lucian Arye Bebchuk and Jesse M. Fried; 25. An economist's perspective on the theory of the firm Oliver Hart; 26. Ownership and the nature of the firm Louis Putterman.
'Over the years, this classic reader has been a terrific source for those seeking to understand the nature of the firm. The updated material in the new edition will extend this distinguished record.' Bengt Holmstrom, MIT
'For decades, economists focused on the miracle of the market to explain the productive performance of advanced economies. But both the miracles and the problems of modern economies are mostly rooted inside the firms that the system cultivates. The previous editions of the Kroszner-Putterman reader served my students well by exposing them to the deepest economic thinking about the role of the firm. This new edition has some great additions that keep this reader right up to date.' Paul Milgrom, Stanford University