an agentic ‘theory of the firm’ jc spender esade & lusem
TRANSCRIPT
an agentic ‘theory of the firm’
JC Spender ESADE & LUSEM
University of Ferrara 202-Dec-2011
theory here ?
University of Ferrara 3
ToF answers• Why firms exist• Why their boundaries are located where they are• Why their internal structure and process is the way it is• Why is their performance so varied
• basic unit of analysis, investment, regulation and managerial action• accounting and its weaknesses• locus of value creation (black box)• tool for entrepreneurs, associations & politicians
Why do we need a ToF ?
how should we ‘state’ a ToF - registered name, balance sheet, blueprint, math formula, words ?
02-Dec-2011
University of Ferrara 4
what kinds of statement in economics ?
• positive - what is - objective reality = (covering laws)Σ
• normative - what ought to be - social
• deductive - modus ponens - logicality
• inductive - modus tollens - generalization
• conventionalist - agreement in the absence of certainty
• instrumentalist - prediction - unit action
• empirical - observation
• hypotheses - verifiable, falsifiable
• speculative - unverifiable, illogical, …
Friedman (1953) - theory as a language, ‘filing system’ for empirical material
02-Dec-2011
and the politics of economics ?
University of Ferrara 5
positivism
• potential and shortcomings• research is all about methodology• etic and emic
02-Dec-2011
University of Ferrara 6
current ToFs• bureaucratic• systems• behavioral• managerial• political• legal• institutional • firm/context - fit• micro-economic
• neoclassical• principal-agent• transactions cost• team production• nexus of contracts• property rights
equilibrium, Rational Man & profit/growth
02-Dec-2011
University of Ferrara 7
analysis
covering law or
theory P
event X ?
covering law or theory Q
statistics - estimating the probability that hypotheses about covering laws and observations are not matters of chance.
If P then X as being more probable than if Q then X
02-Dec-2011
University of Ferrara 802-Dec-2011
let’s look at language - and get back later to theory as language
uncertainty makes language necessary an entailment of denying positivism’s assumptions
University of Ferrara 9
theory as language
• theory T - well-formed sentences that comprise a formal language ΣL - the set of sentences/theorems logically derivable from axioms M
• theorem ti - one rigorous expressions of T
• observation-language O - based on axioms P that are not consistent with M
• Duhem-Quine thesis• natural language L - encompasses L but also admits heuristics,
hunches, inconsistencies, illogicalities, jokes, contradictions, paradoxes, etc.
• ToFs as ‘natural languages’ rather than ‘rational’ or ‘rigorous’
firm as an idiosyncratic practical (natural )language for engaging a malleable world with the intention of seeking profit - but what makes profit possible ?
02-Dec-2011
University of Ferrara 10
‘if - then’ causal relations in the real world
• real world = non-equilibrium, surprising
• asymmetry (moral hazard, lemons, principal-agent, etc.)
• uncertainty - ignorance (of ? )
• uncertainty - uncreated (agency - whose ?)
• Knightian U, knowledge-absence, profit potential
• under U focus must shift from ‘the situation’ to the actor/s who imaginatively define the situation
• from passive ‘functionaries’ to active/agentic entrepreneurs
• multiple languages - anti-positivism
02-Dec-2011
University of Ferrara 11
imagination & judgment
• knowledge-absence = under-determination
• creativity as human complement to human rationality
• what gets created ? artifact - could be a theory
• entrepreneurship = creating a ‘unique’ language that resolves UI a selected aspect of U and bridges into action
• language as the fundamental of the ‘business model’
look at making new language
02-Dec-2011
University of Ferrara 12
statements, language
• A or ~A … (to be or not to be, that is the question)
• syllogism - instance a is deducible from covering law/theory A - a is an instance of A
• Socrates is mortal
• syllogism is tautology
• how can we know or state ~A ?
• a language to encompass both assertion and negation
02-Dec-2011
University of Ferrara 13
where do languages come from ?
• invented distinctions - conceptual (A, B, C), empirical (O)
• distinctions with negations
• axioms - self-referencing terms (Spencer-Brown & Luhmann) - distinctions without negations
• statements synthesize relations as the interplay of concepts and sense-data
• build from low level to increasing complexity = precision
• generality to specificity
• collectivity to individuality
• natural language to formal language
02-Dec-2011
University of Ferrara 14
language of empiricism, falsification
• ~A1 more than a negation - an assertion A2 we associate with observation O1 or O2 (not ~O)
• testing requires an O language based on axioms un-related to the A axioms (Duhem-Quine)
• O language must encompass A and ~A
• thus we need A1, A2, O1, O2 to draw a conclusion such as If A1 then O1
• causal statements are ‘law-like’ and falsifiable
• hypotheses
• multiple languages again - U
02-Dec-2011
O1 O2
A1
A2
hypothesis - ( If A1 then O1
and If A2 then O2)
University of Ferrara 15
synthesis - making new language
• matrix
• independent languages
• A, B and O affirming If A1 then B1, etc. leading to C as explanation
• method of synthesizing interplay between theory & practice
A1 A2
B1
B2
02-Dec-2011
language C - encompasses {(A1, B1), (A2, B2 ), (A2, B1), (A1, B2)}
University of Ferrara 16
time-out !
02-Dec-2011
University of Ferrara 17
what’s this to do with firms ?
02-Dec-2011
University of Ferrara 1802-Dec-2011
• firm is a deliberately created language that guides others’ attention, perception, and practice towards intentions (goals) when complete knowledge of situation and means is not available
• entrepreneur’s role is agentic - to create, deploy and control (1) intentions (2) this language (jargon), and (3) practice
• thereby to bring something new into the world (Penrose) that was not there previously
• the outcome - harness the agency of others into engaging selected uncertainties U - innovation
University of Ferrara
von Clausewitz’s methodology
• relating theory to practice - acting with partial understanding• deploy theories, heuristics, hunches, to make action frame• jump in - frame as language for engaging an uncertain world• synthesize options in frame - Barnard• etic & emic - whose A, B, C, D story ?
02-Dec-2011 19
A
B
CD
example ??
University of Ferrara 20
agentic ToF
02-Dec-2011
pricing attack
technologicaladvance
un-exploitedpotential
BM
regulatorychanges
University of Ferrara 21
rhetoric - making language work for you
• entrepreneurial vision
• harnessing others’ agency
• incentives or persuasion ?
• logos, ethos, pathos
• how to construct compelling argument
02-Dec-2011
University of Ferrara 22
collaborative agency• uncertainty
• engagement with others’ imagination
• language of action - rhetorical activity
• the ‘firm in action’
• firm as socio-economic ‘tool’
02-Dec-2011
University of Ferrara 23
agentic firm - and the world it invokes
• mind’s hand reaching creatively into the unknown to find something new - the firm as the locus of collaborative innovation
• capitalism - ownership of the means of production
• Coase & subordination
• legitimated modes of subordination
• externalization of ‘costs’, privatization of gains
02-Dec-2011
University of Ferrara 24
summary
• ToF that generates profit and economic growth MUST be about people and their agency - not RM
• agency interrupts between cause and effect
• the theory turns on Knightian uncertainty U - resolved by the imagination of those engaged
• construct a language - business model
• for the agentic actors - BM bridges between entrepreneur’s theory and their practice
• politics and economics of subordination vs freedom
• being about people and their productive relations, the firm is an essentially political phenomenon
02-Dec-2011
University of Ferrara 2502-Dec-2011
!!!