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Ziifs_notes - Why is big business so important The view...

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Why is big business so important? The view that companies are social systems and economic institutions Internal Focus 1. Transaction cost Economics 2. Chandler External Focus 1. Contract vs Companies are producers with a unique structure. Culture - Barney Need Also to consider how? 1. Technology a. Telegraphs b. Railways- the railways infact was the source of the first companies 2. Market v Government Influence 3. Uncertainty 4. Transaction cost economics 5. Form of Growth 6. Contracts 7. Role of Entrepreneur- efficiently allocate capital and labour. 8. Organisational Culture – management and culture Other components 1. Role of technology Led by railways and telegraph o Biggest employers & users of capital o “London Midland and Scottish railways employing 220,000 in 1935” (Johnson 1986) o 1898 railways accounted for 60% of publicly issued stock (Baskin and Miranti) o Expanded access to market 1 st trans continental completed in 1869 o Increased competition Led to branding most well known brands date from the 1880s and 1890s o Allowed economies of scale to be exercised Continuous production led to mass production Possibility of technological determinism
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A reductionist doctrine that a society’s technology determines its cultural values. o Impact of Japanese restrictions on trade 2. Gov influence o 1 st Multinationals East India Trading Company Zaibatsu in Japan War= Mitsubishi lent ships to Japan, who had subsidised the original production. o “a customer, a policeman and an ally – not an owner.”(Micklethwait and Wooldridge (2003) o Anti competitive laws in the late 19 th century drove companies together e.g. Sherman Act 1890, Clayton Act 1914 o Decrease bureaucracy increase innovation= incentive of profit. 3. Uncertainty- the idea of people wanting employment (Frank Knight – “Risk and Uncertainty) o People also possibly prefer to work for someone else rather than be self employed o Backward integration due to uncertainty of suppliers.- suppliers make impersonal prediction of wants ” (Professor knights) o Ranges of possible messages, offers threats and timing ” – impossible to measure due to the infinite size of a desion tree 4. Nature of the firms (Coase 1937)- Transaction cost Economics In economics – allocation of F.O.P. determined by price but not in reality = influence of human belief i.e. the last F.O.P. – Entrepreneurship 1. “Outside the firm price movement’s direct production. Within a firm these market transactions are eliminated and is substituted [by] the entrepreneur co- ordinator, who directs production.” 2. Distinguishing marks of the firm is the suppression of the price mechanism” 3. Entrepreneur Coordinator Price 4. Customers want Value Added products Transaction Cost Economics o 3 costs: 1. Search costs - effort involved in finding the correct price and product.
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