Rethinking the firm: organizational approaches.

Abstract

How does social science based organization theory describe the business firm? Sociology, political science, social psychology and ethnology have inspired two almost classical perspectives. One theorizes the firm as an arena for strategic behavior. The other underlines the way social pressure mechanisms structure a moral community dimension. Two additional approaches exist, less explored. The firm can be defined as a collective actor, the agenda for knowledge being to explain how far collective choice is possible. Or the firm may be studied from a cognitive perspective, as an organization which interprets and thinks. The article argues that organization theory offers a unitary if not limited view of the business firm. Social sciences basically debate around two alternative views which differentiate according to four characteristics: the action arena or the context of behavior; the teleological property of the unit; the payoff matrix or the sources of preferences with which members enter collective choice contexts; and the sources of managerial influence.

Keywords: organizational theory, collective action, cognitions, strategic behavior, Gemeinschaft, social function of the firm

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Rationally constructed organizations pervade modern industrial societies. The bonds of tradition, manifest in kinship, tribe and community, have been supplanted by individuals' membership in purposefully designed and administered organizations. These corporate actors are a fundamental unit of social integration and a major source of social stratification (Coleman 1990).

A prototype of these organizations is the modern business firm. Business firms produce wealth for individuals and societies, develop and exploit technologies which have led industrial revolutions, and influence, among other things, gender, race, ethnic, and class structures.

What is a business firm? One view describes business firms as political coalitions. Firms, in this view, are collections of subunits pursuing separate goals. The role of management is to structure inducements so that the individual subunits identify their interests with those of the firm and, thereby, contribute to its mission. Another view of the business firm describes it as a nexus for contracts between actors free to sell their skills and labor on the open market. The management role in this view is to define efficiently the content of contracts, monitor the term structure of the portfolio of contracts, and insure compliance with contractual obligations. Common to both of these formulations is the net-classical precept that business firms are arenas through which self-interested, self-seeking behavior is mobilized to accomplish collective instrumental aims.