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How does opportunistic behavior influence firm size? An evolutionary approach to organizational behavior

Published online by Cambridge University Press:  16 July 2010

CHRISTIAN CORDES ,
PETER RICHERSON ,
RICHARD MCELREATH  and
PONTUS STRIMLING
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Abstract:

This paper relates firm size and opportunism by showing that, given certain behavioural dispositions of humans, the size of a profit-maximizing firm can be determined by cognitive aspects underlying firm-internal cultural transmission processes. We argue that what firms do better than markets – besides economizing on transaction costs – is to establish a cooperative regime among its employees that keeps in check opportunism. A model depicts the outstanding role of the entrepreneur or business leader in firm-internal socialization processes and the evolution of corporate cultures. We show that high opportunism-related costs are a reason for keeping firms’ size small.

Type
Research Article
Information
Journal of Institutional Economics , Volume 7 , Issue 1 , March 2011 , pp. 1 - 21
Copyright
Copyright © The JOIE Foundation 2010

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