Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/31856 
Year of Publication: 
2006
Series/Report no.: 
Papers on Economics and Evolution No. 0618
Publisher: 
Max Planck Institute of Economics, Jena
Abstract: 
This paper relates firm size and opportunism by showing that, given certain behavioral 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.
Subjects: 
Theory of the Firm
Transaction Cost Economics
Cultural Evolution
Opportunism
Cooperation
JEL: 
D21
D23
D01
M14
C61
Document Type: 
Working Paper

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