Production and the Firm

O&M’s Peter Klein on production and the firm.


Organizing entrepreneurial judgment: a must-read book

O&M’s Nicolai Foss and Peter Klein are publishing a book (forthcoming in early 2012) Organizing Entrepreneurial Judgment: A New Approach to the Firm, Cambridge University Press.  Their book starts with the premise that “the theory of entrepreneurship and the theory of the firm should be treated together.”  I agree.

So, if you want to read up on the latest and greatest at the nexus of entrepreneurship, organizations and markets – then this is definitely the book for you.

Here is the table of contents.

1. The need for an entrepreneurial theory of the firm
2. What is entrepreneurship?
3. Entrepreneurship: from opportunity discovery to judgment
4. What is judgment?
5. From shmoo to heterogeneous capital
6. Entrepreneurship and the economic theory of the firm
7. Entrepreneurship and the nature and boundaries of the firm
8. Internal organization: original and derived judgment
9. Concluding discussion

I haven’t quite read the whole book, yet, but am working through it.  So more posts to come.


Psyched Out Strategy: What is a firm?

Glenn Hoetker recently gave me the opportunity to consider what new contributions the field of psychology could offer to the strategy literature (see the description here). The video illustrates how behavior often depends more on perception than on reality — does it matter if the steering wheel is attached or not if the other driver acts as if it is? Often, researchers are interested in organizational outcomes and theorize that the underlying behaviors are driven by objective reality. What research opportunities are highlighted as we take seriously the subjective nature of our most central constructs?

In this installment, we explore the question, “what is a firm?” This is so taken for granted in the field that most of you will probably stop reading here. Read the rest of this entry »


Vertical Integration and a Teardown Analysis of the iPhone 4S

iPhone 4S Teardown

Last week there was a very useful WSJ article reporting on an analysis of the supplier relationships at the core of the new iPhone 4S (here … while it lasts). This seems like a nice mini-case analysis to see how our theories seem to explain actual outcomes.

They note that Qualcomm “is the big winner” because it is supplying a suite of chips that adds up to $15 per phone. Intel is a loser because it acquired Infineon and then those chips were dropped from the product.

Samsung lost out on the memory chips to its Korean rival Hynix — a surprise since Samsung is known to have a more reliable product. However, interestingly, Samsung did retain its role as the manufacturer of Apple’s proprietary A5 processor which provides the iPhone 4S and the iPad 2 with the bulk of its computing power.

Read the rest of this entry »


If I had known as much mathematics as you, I would have become a chemist

The below is part 1 of an Oliver Hart lecture (from earlier this year) on reference points and the theory of the firm (here’s the associated Economica piece, and the QJE article).  After Coase saw Hart present the first time, sometime in the 90s, he told Hart “If I had known as much mathematics as you, I would have become a chemist.”  It wasn’t a compliment.  Coase does not think much of formal approaches in economics.