This chapter addresses organisational decision-making. Figure 2.1 lists the main elements that influence decision-making mechanisms within the firm, which include property structure, hierarchical relationships and in particular the allocation of control rights and responsibilities (who participates in decision-making), rules regulating collegial decisions, the aims of the firm, incentive structure and the motivations of stakeholders and the degree of rationality of the actors' behaviour. These elements are linked one to another by mutual and close interaction. They are strongly sensitive to basic conditions, listed in the bottom right-hand rectangular block in figure 2.1, and deeply influence organisational coordination of the development of capabilities, the governance of transactions and determination of the scale dimension of processes, represented in the triangular block of figure 2.1.

For the sake of brevity, the main links between the decision-making elements may be summarised by the following causal chain. The firm's property structure affects control rights. The allocation of responsibilities and control rights plays a role in establishing the aims of the firm that shape its incentive structure, while the latter then influences individual behaviour within the decision-making processes, along with the kind of rationality that is related to the level of abilities. Abilities are, in turn, linked, to the degree of uncertainty and other basic conditions. This extremely simplified chain is complicated, in reality, by the influence of various basic conditions outlined in chapter 1, by the numerous possible feedbacks which bring about a two-way relationship between the different decision-making elements and finally by the uneven and changing distribution of contractual power among the various stakeholders.