Robert Gibbons, MIT, February 2011
PART I: FOUNDATIONS
1. Agency Theory for Organizational Economics
1.1 Formal Incentive Contracts
1.2 Relational Incentive Contracts
1.3 No Incentive Contracts (“Career Concerns”)
2. Elemental Theories of the Firm
2.1 Incentive Systems
2.2 Adaptation
2.3 Property Rights
2.4 Rent Seeking
PART II: WITHIN FIRMS
3. Decision-Making in Organizations
3.1 Team Theory and Garbage Cans
3.2 Authority and Power
3.3 Politics and Influence
3.4 Social Relations
3.5 Culture and Language
3.6 Leadership
4. Employment in Organizations
4.1 Pay for Performance
— Allocation of Authority
— Implementing Authority
— Committees
— Peer Effects
— Basic Theory and Evidence
— Gaming
— CEO Pay
— Tournaments
— Subjectivity
— Career Concerns
— The Ratchet Effect
— Intrinsic Motivation and Reciprocity
4.2 Job Assignments & Job Design
4.3 Skill Development
4.4 Networks and Demography
4.5 Employment Systems
4.6 Careers in Organizations
5. Structures and Processes in Organizations
5.1 Models of Hierarchy
August ‘10 2 R. Gibbons
5.2 Delegation
5.3 Organizational Design
5.4 Routines, Production, and Capabilities
5.5 Knowledge Management and Product Development
5.6 Growth and Change
— Information Processing
— Resource Allocation
— Monitoring
— Problem Solving
— Decision Rights
— Partnerships
— Contingencies and Complementarities
PART III: BETWEEN FIRMS?
6. The Boundary of the Firm Revisited
6.1 Vertical Integration: Classic Evidence and Commentary
6.2 Vertical Integration: Recent Theory and Evidence
6.3 Formal Contracts Between Firms
6.4 Relational Contracts Between Firms
6.5 Organizations and Industry Structure
— Franchising
7. Corporate Strategy
7.1 Divisionalization and Conglomerates
7.2 Beyond Divisionalization: Matrix, Network, and Other Organizational Forms
7.3 Resource Allocation and Transfer Pricing
7.4 Joint Ventures, Alliances, and Other Hybrids
7.5 Multinational Corporations, International Trade, and FDI
7.6 Organizations and Industry Dynamics
— Hybrids and Innovation
PART IV: BEYOND FIRMS
8.1 Communities
8.2 Agencies
8.3 States
1. AGENCY THEORY FOR ORGANIZATIONAL ECONOMICS
Bolton, Patrick and Mathias Dewatripont. 2005. Contract Theory. Cambridge, MA: MIT Press.
Chapters 4, 8, and 10.
Gibbons, Robert. 2005. “Incentives Between Firms (and Within).” Management Science 51: 2-17
Readings in Organizational Economics
August ‘10 3 R. Gibbons
Gibbons, Robert and John Roberts. 2012. “Incentives in Organizations.” Forthcoming in R.
Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ:
Princeton University Press.
Malcomson, James. 2012. “Relational Incentive Contracts.” Forthcoming in R. Gibbons and J.
Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ: Princeton University
1.1 Formal Incentive Contracts
Holmstrom, Bengt and Paul Milgrom. 1991. “Multitask Principal-Agent Analyses: Incentive
Contracts, Asset Ownership, and Job Design.” Journal of Law, Economics and Organization 7:
Baker, George. 1992. “Incentive Contracts and Performance Measurement.” Journal of Political
Economy 100: 598-614.
Feltham, Gerald and Jim Xie. 1994. “Performance Measure Congruity and Diversity in Multi-Task
Principal/Agent Relations.” The Accounting Review 69: 429-53.
Datar, Srikant, Susan Kulp, and Richard Lambert. 2001. “Balancing Performance Measures.”
Journal of Accounting Research 39: 75-92.
Baker, George. 2002. “Distortion and Risk in Optimal Incentive Contracts.” Journal of Human
Resources 37: 728-751.
Mirrlees, James. 1975. “The Theory of Moral Hazard and Unobservable Behaviour: Part I.”
Unpublished manuscript, Oxford University. Published in Review of Economic Studies 66 (1999):
Holmstrom, Bengt. 1979. “Moral Hazard and Observability,” Bell Journal of Economics, 10: 74-
Grossman, Sanford and Oliver Hart. 1983. “An Analysis of the Principal-Agent Problem,”
Econometrica 51: 7-45.
Holmstrom, Bengt. 1982. “Moral Hazard in Teams.” Bell Journal of Economics 13: 324-340.
Lazear, Edward and Shewin Rosen. 1981. “Rank-Order Tournaments as Optimal Labor
Contracts.” Journal of Political Economy 89: 841-64.
Mookherjee, Dilip. 1984. “Optimal Incentive Schemes with Many Agents.” Review of Economic
Studies 51: 433-46.
Itoh, Hideshi. 1991. “Incentives to Help in Multi-Agent Situations.” Econometrica 59: 611-36.
1.2 Relational Incentive Contracts
Readings in Organizational Economics
August ‘10 4 R. Gibbons
Bull, Clive. 1987. “The Existence of Self-Enforcing Implicit Contracts,” Quarterly Journal of
Economics 102: 147-59.
MacLeod, Bentley and James Malcomson. 1989. “Implicit Contracts, Incentive Compatibility, and
Involuntary Unemployment.” Econometrica 57: 447-80.
Levin, Jonathan. 2003. “Relational Incentive Contracts.” American Economic Review 93: 835-57.
Fuchs, William. 2007. “Contracting with Repeated Moral Hazard and Private Evaluations.”
American Economic Review 97: 1432-48.
MacLeod, Bentley. 2007. “Reputations, Relationships, and Contract Enforcement.” Journal of
Economic Literature 45: 595-628.
1.3 No Incentive Contracts (“Career Concerns”)
Holmstrom, Bengt. 1982. “Managerial Incentive Problems—A Dynamic Perspective.” In Essays
in Economics and Management in Honor of Lars Wahlbeck. Helsinki: Swedish School of
Economics. Republished in Review of Economic Studies 66 (1999): 169-82.
Meyer, Margaret and John Vickers. 1997. “Performance Comparisons and Dynamic Incentives.”
Journal of Political Economy 105: 547-581.
Dewatripont, Mathias, Ian Jewitt and Jean Tirole. 1999. “The Economics of Career Concerns, Part
I: Comparing Information Structures.” The Review of Economic Studies 66: 183-98.
Dewatripont, Mathias, Ian Jewitt and Jean Tirole. 1999. “The Economics of Career Concerns, Part
II: Application to Missions and Accountability of Government Agencies.” The Review of
Economic Studies 66: 199-217.
Prendergast, Canice. 2009. “Contracts and Conflict in Organizations.” Unpublished manuscript,
University of Chicago.
2. ELEMENTAL THEORIES OF THE FIRM
Bolton, Patrick and Mathias Dewatripont. 2005. Contract Theory. Cambridge, MA: MIT Press,
Chapters 11 and 12.
Gibbons, Robert. 2005. “Four Formal(izable) Theories of the Firm?” Journal of Economic
Behavior and Organization 58: 202-247 (Sections 1-3).
Segal, Ilya and Michael Whinston. 2012. “Property Rights.” Forthcoming in R. Gibbons and J.
Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ: Princeton University
Tadelis, Steven and Oliver Williamson. 2012. “Transaction-Cost Economics.” Forthcoming in R.
Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ:
Princeton University Press.
Readings in Organizational Economics
August ‘10 5 R. Gibbons
Coase, Ronald. 1937. “The Nature of the Firm.” Economica, 4: 386-405.
Williamson, Oliver 1971. “The Vertical Integration of Production: Market Failure
Considerations.” American Economic Review, 61: 112-23.
Alchian, Armen and Harold Demsetz. 1972. “Production, Information Costs, and Economic
Organization.” American Economic Review, 62: 316-25.
2.1 Incentive Systems
Holmstrom, Bengt and Paul Milgrom. 1994. “The Firm as an Incentive System.” American
Economic Review 84: 972-91.
Holmstrom, Bengt and John Roberts. 1998. “The Boundaries of the Firm Revisited.” Journal of
Economic Perspectives 12: 73-94.
Holmstrom, Bengt. 1999. “The Firm as a Subeconomy.” Journal of Law Economics and
Organizations 15: 74-102.
Simon, Herbert. 1951. “A Formal Theory of the Employment Relationship.” Econometrica 19:
Williamson, Oliver 1975. Markets and Hierarchies: Analysis and Antitrust Implications. New
York, NY: Free Press, Chapters 4 and 5.
Williamson, Oliver. 1991. “Comparative Economic Organization: The Analysis of Discrete
Structural Alternatives.” Administrative Science Quarterly 36: 269-96.
Tadelis, Steven. 2002. “Complexity, Flexibility, and the Make-or-Buy Decision.” American
Economic Review 92: 433-37.
Grossman, Sanford and Oliver Hart. 1986. “The Costs and Benefits of Ownership: A Theory of
Vertical and Lateral Integration.” Journal of Political Economy, 94: 2, 691-719.
Hart, Oliver and John Moore. 1990. “Property Rights and the Nature of the Firm.” Journal of
Political Economy 98: 1119-58.
Hart, Oliver. 1995. Firms, Contracts, and Financial Structure, Oxford: Clarendon Press, Chapter
Klein, Benjamin, Robert Crawford, and Armen Alchian. 1978. “Vertical Integration, Appropriable
Rents and the Competitive Contracting Process.” Journal of Law and Economics 21: 297-326.
Williamson, Oliver. 1979. “Transaction Cost Economics: The Governance of Contractual
Relations.” Journal of Law and Economics 22: 233-61.
Readings in Organizational Economics
August ‘10 6 R. Gibbons
3. DECISION-MAKING IN ORGANIZATIONS
Gibbons, Robert. 2003. “Team Theory, Garbage Cans, and Real Organizations: Some History and
Prospects of Economic Research on Decision-Making in Organizations.” Industrial and Corporate
Change 12: 753-87.
Bolton, Patrick and Mathias Dewatripont. 2012. “Authority in Organizations.” Forthcoming in R.
Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ:
Princeton University Press.
Camerer, Colin and Roberto Weber. 2012. “Experimental Organizational Economics.”
Forthcoming in R. Gibbons and J. Roberts (eds.), Handbook of Organizational Economics.
Princeton, NJ: Princeton University Press. (Sections V and VI)
Hermalin, Benjamin. 2012a. “Leadership and Corporate Culture.” Forthcoming in R. Gibbons and
J. Roberts (eds.), Handbook of Organizational Economics. Princeton, NJ: Princeton University
March, James and Herbert Simon. 1958. Organizations. New York, NY: John Wiley & Sons.
Cyert, Richard and James March. 1963. A Behavioral Theory of the Firm. Englewood Cliffs, NJ:
Arrow, Kenneth. 1974. The Limits of Organization. New York: W.W. Norton & Co.
3.1 Team Theory and Garbage Cans
Marschak, Jacob and Roy Radner. 1972. Economic Theory of Teams. New Haven, CT: Yale
University Press.
Radner, Roy. 1972. “Teams” in C.B McGwire and R. Radner (eds) Decision Making and
Sah, Raj and Joseph Stiglitz. 1986. “The Architecture of Economic Systems: Hierarchies and
Polyarchies.” American Economic Review 76:716-27.
Cohen, Michael, James March, and Johan Olsen. 1972. “A Garbage Can Model of Organizational
Choice.” Administrative Science Quarterly 17:1-25.
Feldman, Martha and James March. 1981. “Information in Organizations as Signal and Symbol.”
Administrative Science Quarterly 26:171-86.
3.2 Authority and Power
Allocation of Authority
Readings in Organizational Economics
August ‘10 7 R. Gibbons
Jensen, Michael and William Meckling. 1999. “Specific Knowledge and Divisional Performance
Measurement.” Journal of Applied Corporate Finance 12: 8-17.
Hart, Oliver and John Moore. 2008. “Contracts as Reference Points.” Quarterly Journal of
Economics 123: 1-48.
Hickson, D., C. Hinings, C. Lee, R. Schneck, and J. Pennings. 1971. “A Strategic Contingencies
Theory of Intraorganizational Power.” Administrative Science Quarterly 16:216-29.
Hinings, C., D. Hickson, J. Pennings, and R. Schneck. 1974. “Structural Conditions and
Intraorganizational Power.” Administrative Science Quarterly 19:22-44.
Rotemberg, Julio. 1993. “Power in Profit-Maximizing Organizations.” Journal of Economics &
Management Strategy 2:165-98.
Rajan, Raghuram and Luigi Zingales. 1998. “Power in a Theory of the Firm.” Quarterly Journal
of Economics 113: 387-432.
Van den Steen, Eric. 2009. “Disagreement and the Allocation of Control.” Forthcoming, Journal
of Law, Economics, and Organization.
Pfeffer, Jeffrey. 1981. “Sources of Power in Organizations.” Chapter 4 in Power in Organizations.
Marshfield, MA: Pitman.
Implementation of Authority
Aguilar, Francis and Arvind Bhambri. 1983. “Johnson & Johnson (A), (B).” Harvard Business
School Case #384-053 and -054.
Aghion, Philippe and Jean Tirole. 1997. “Formal and Real Authority in Organizations.” Journal of
Political Economy 105:1-29.
Baker, George, Robert Gibbons, and Kevin J. Murphy. 1999. “Informal Authority in
Organizations.” Journal of Law, Economics, and Organization 15: 56-73.
Landier, Augustin, David Sraer, and David Thesmar. 2009. “Optimal Dissent in Organizations.”
Review Economic Studies 76: 761-94.
Marino, Anthony, John Matsusaka, and Ján Zábojnik. 2009. “Disobedience and Authority.”
Journal of Law, Economics, and Organization xx: yy-zz.
Van den Steen, Eric. 2010. “Interpersonal Authority in a Theory of the Firm.” American Economic
Review 100: 466-90.
Crozier, Michel. 1964. The Bureaucratic Phenomenon. Chicago: University of Chicago Press.
3.3 Politics and Influence
March, James. 1962. “The Business Firm as a Political Coalition.” Journal of Politics 24: 662-78.
Skaperdas, Stergios. 1992. “Cooperation, Conflict, and Power in the Absence of Property Rights.”
American Economic Review 82: 720-39.
Prendergast, Canice. 1993. “A Theory of ‘Yes Men.’” American Economic Review 83: 757-70.
Readings in Organizational Economics
August ‘10 8 R. Gibbons
Rajan, Raghuram and Luigi Zingales. 2000. “The Tyranny of Inequality.” Journal of Public
Economics 76: 521-58.
Rotemberg, Julio and Garth Saloner. 1995. “Overt interfunctional conflict (and its reduction
through business strategy).” Rand Journal of Economics 26: 630-53.
Milgrom, Paul and John Roberts. 1988. “An Economic Approach to Influence Activities in
Organizations.” American Journal of Sociology 94: S154-S179.
Dessein, Wouter. 2002. “Authority and Communication in Organizations.” Review of Economic
Studies 69: 811-38.
Mitusch, Kay and Roland Strausz. 2005. “Mediation in Situations of Conflict and Limited
Commitment.” Journal of Law, Economics, and Organization 21: 467-500.
Dewatripont, Mathias and Jean Tirole. 2005. “Modes of Communication.” Journal of Political
Economy 113: 1217-38.
Friebel, Guido and Michael Raith. 2004. “Abuse of Authority and Hierarchical Communication.”
Rand Journal of Economics 35: 224-44.
Kramer, Roderick. 2001. “Organizational Paranoia: Origins and Dynamics.” Research in
Organizational Behavior 23: 1-42.
Machiavelli, Niccolo. 1988. The Prince. Q. Skinner and R. Price (eds.). New York: Cambridge
University Press.
Riker, William. 1986. The Art of Political Manipulation. New Haven, CT: Yale University Press.
Sah, Raj and Joseph Stiglitz. 1988. “Committees, Hierarchies, and Polyarchies.” Economic
Journal 98: 2817-38.
Feddersen, Timothy, and Wolfgang Pesendorfer. 1998. “Convicting the Innocent: The Inferiority
of Unanimous Jury Verdicts under Strategic Voting.” American Political Science Review 92: 23-
Li, Hao, Sherwin Rosen, and Wing Suen. 2001. “Conflict and Common Interests in Committees.”
American Economic Review 91: 1478-97.
Persico, Nicola. 2004. “Committee Design with Endogenous Information.” Review of Economic
Studies 71: 165-91.
Casella, Alessandra. 2005. “Storable votes.” Games and Economic Behavior 51: 391-419.
Levy, Gilat. 2007. “Decision Making in Committees: Transparency, Reputation, and Voting
Rules.” American Economic Review 97: 150-68.
Visser, Bauke and Otto Swank. 2007. “On Committees of Experts.” Quarterly Journal of
Economics 122: 337-72.
Wernerfelt, Birger. 2007. “Delegation, Committees, and Managers.” Journal of Economics and
Management Strategy 16: 35-51.
Readings in Organizational Economics
August ‘10 9 R. Gibbons
Dessein, Wouter. 2007. “Why a Group Needs a Leader: Decision-making and Debate in
Committees.” Unpublished manuscript, University of Chicago.
3.4 Social Relations
Miller, Gary. 1992. “Horizontal Cooperation.” In Ch. 9 of Managerial Dilemmas: The Political
Economy of Hierarchy. Cambridge: Cambridge University Press.
Bandiera, Oriana, Iwan Barankay, and Imran Rasul. 2006. “The Evolution of Cooperative Norms:
Evidence from a Natural Field Experiment.” Advances in Economic Analysis & Policy 6: Issue 2,
Tirole, Jean. 1986. “Hierarchies and Bureaucracies: On the Role of Collusion in Organizations.”
Journal of Law, Economics, and Organization 2:181-214.
Battaglini, Marco, Roland Bénabou, and Jean Tirole. 2005. “Self-control in peer groups.” Journal
of Economic Theory 123: 105-34.
Jones, Stephen. 1990. “Worker Interdependence and Output: The Hawthorne Studies
Reevaluated.” American Sociological Review 55:176-90.
Charness, Gary, Luca Rigotti, and Aldo Rustichini. 2007. “Individual Behavior and Group
Membership.” American Economic Review 97: 1340-52.
Prendergast, Canice and Robert Topel. 1996. “Favoritism in Organizations.” Journal of Political
Economy 104:958-78.
Garicano, Luis, Ignacio Palacios, and Canice Prendergast. 2005. “Favoritism Under Social
Pressure.” Review of Economics and Statistics 87: 208-16.
Kandel, Eugene and Edward Lazear. 1992. “Peer Pressure and Partnership.” Journal of Political
Economy 100: 801-17.
Barron, John and Kathy Paulson Gjerde. 1997. “Peer Pressure in an Agency Relationship.”
Journal of Labor Economics 15: 234-54.
Ichino, Andrea and Giovanni Maggi. 2000. “Work Environment and Individual Background:
Explaining Regional Shirking Differentials in a Large Italian Firm.” Quarterly Journal of
Economics 115: 1057-90.
Falk, Armin and Andrea Ichino. 2005. “Clean Evidence on Peer Effects.” Journal of Labor
Economics 24: 39-57.
Mas, Alex and Enrico Moretti. 2007. “Peers at Work.” American Economic Review 99: 112-45.
Mohnen, Alwine, Kathrin Pokorny, and Dirk Sliwka. 2008. “Transparency, Inequity Aversion,
and the Dynamics of Peer Pressure in Teams: Theory and Evidence.” Journal of Labor Economics
Kato, Takao and Pian Shu. 2007. “Performance Spillovers and Social Network in the Workplace:
Evidence from Rural and Urban Weaves in a Chinese Textile Firm.” Unpublished manuscript,
Colgate University.
Readings in Organizational Economics
August ‘10 10 R. Gibbons
Guryan, Jonathan, Kory Kroft, and Matt Notowidigdo. 2007. “Peer Effects in the Workplace:
Evidence from Random Groupings in Professional Golf Tournaments.” Unpublished manuscript,
3.5 Culture and Language
Kaftan, Colleen and Louis Barnes. 1991. “Sun Hydraulics Corporation (A and B) and (C).”
Harvard Business School Cases #9-491-119 and 9-491-125.
Kreps, David. 1990. “Corporate Culture and Economic Theory.” In J. Alt and K. Shepsle, eds.
Perspectives on Positive Political Economy. Cambridge University Press.
Schein, Edgar. 1991. “What is culture?” In P. Frost, L. Moore, M. Louis, C. Lundberg, and J.
Martin (eds.), Reframing organizational culture. Newbury Park, CA: Sage Publications.
Crémer, Jacques. 1993. “Corporate Culture and Shared Knowledge.” Industrial and Corporate
Change 2:351-86.
Rob, Rafael, and Peter Zemsky. 2002. “Social Capital, Corporate Culture, and Incentive
Intensity.” Rand Journal of Economics 33: 243-57
Weber, Roberto and Colin Camerer. 2003. “Cultural Conflict and Merger Failure: An
Experimental Approach.” Management Science 49: 400-15.
Van den Steen, Eric. 2005. “On the Origin of Shared Beliefs (and Corporate Culture).”
Unpublished manuscript, HBS.
Carrillo, Juan and Denis Gromb. 2006. “Cultural Inertia and Uniformity in Organizations.”
Journal of Law, Economics, and Organization 23: 743-71.
Weber, Roberto. 2006. “Managing growth to achieve efficient coordination in large groups.”
American Economic Review 96:1, 114-126.
Cremer, Jacques, Luis Garicano, Andrea Prat. 2007. “Language and the Theory of the Firm.”
Quarterly Journal of Economics 122: 373-407.
Selten, Reinhard and Massimo Warglien. 2007. “The emergence of simple languages in an
experimental coordination game.” Proceedings of the National Academy of Sciences 104: 7361-66
Colin Camerer and Roberto Weber. 2008. “Growing organizational culture in the laboratory.” In
Handbook of Experimental Economics Results, eds. Charles R. Plott and Vernon L. Smith.
Amsterdam, The Netherlands: Elsevier.
Bénabou, Roland. 2008. “Groupthink: Collective Delusions in Organizations and Markets.”
Unpublished manuscript, Princeton University.
Van den Steen, Eric. 2009. “Culture Clash: The Costs and Benefits of Homogeneity.”
Unpublished manuscript, HBS.
O’Reilly, Charles and Jennifer Chatman. 1996. “Culture as social control: Corporations, cults, and
commitment.” In B. Staw and L. Cummings (eds.), Research in Organizational Behavior. 18: 157-
Readings in Organizational Economics
August ‘10 11 R. Gibbons
Schein, Edgar. 1992. Organizational Culture and Leadership. San Francisco: Jossey-Bass
Kunda, Gideon. 1992. Engineering Culture: Control and Commitment in a High-Tech
Corporation. Philadelphia, PA: Temple University Press.
Rogers, Gregory and Michael Beer. 1995. “Human Resources at Hewlett-Packard (A) and (B).”
Harvard Business School Cases #9-495-051 and 9-495-052.
Rotemberg, Julio and Garth Saloner. 1993. “Leadership Style and Incentives.” Management
Science 39: 1299-1318.
Hermalin, Benjamin. 1998. “Toward an Economic Theory of Leadership: Leading By Example.”
American Economic Review 88: 1188-1206.
Weber, R. Rottenstreich, Y., Camerer, C. and Knez, M. 2001. “The Illusion of Leadership:
Misattribution of Cause in Coordination Games.” Organizational Science 12:582-98.
Bertrand, Marianne and Antoinette Schoar. 2003. “Managing with Style: The Effect of Managers
on Firm Policies.” Quarterly Journal of Economics 118: 1169-1208.
Van den Steen, Eric. 2005. “Organizational Beliefs and Managerial Vision.” Journal of Law,
Economics, and Organization 21: 256-83.
Caillaud, Bernard and Jean Tirole. 2007. “Consensus Building: How to Persuade a Group.”
American Economic Review 97: 1877-1900.
Brocas, Isabelle and Juan Carrillo. 2007. “Influence through ignorance.” Rand Journal of
Economics 38: 931-47.
Dewan, Torun and David Myatt. 2008. “The Qualities of Leadership: Direction, Communication,
and Obfuscation.” American Political Science Review 102: 351-68.
Ganz, Marshall. 2008. “Leading Change: Leadership, Organization, and Social Movements.”
Unpublished manuscript, Harvard University.
Zald, Mayer and Michael Berger. 1978. “Social Movements in Organizations: Coup d’Etat,
Insurgency, and Mass Movements.” American Journal of Sociology 83: 823-61.
Selznick, Philip. 1957. Leadership in Administration. New York: Harper & Row.
4. EMPLOYMENT IN ORGANIZATIONS
Gibbons, Robert and Michael Waldman. 1999. “Careers in Organizations: Theory and Evidence.”
Chapter 36 in Volume 3B of O. Ashenfelter and D. Card (eds.), Handbook of Labor Economics,
Readings in Organizational Economics
August ‘10 12 R. Gibbons
Baron, James and David Kreps. 2012. “Employment as an Economic and a Social Relationship.”
Forthcoming in R. Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics.
Princeton, NJ: Princeton University Press.
Ichniowski, Casey and Kathryn Shaw. 2012. “Insider Econometrics: A Roadmap to Estimating
Empirical Models of Organizational Performance.” Forthcoming in R. Gibbons and J. Roberts
(eds.), The Handbook of Organizational Economics. Princeton, NJ: Princeton University Press.
Lazear, Edward and Paul Oyer. 2012. “Personnel Economics.” Forthcoming in R. Gibbons and J.
Roberts (eds.), Handbook of Organizational Economics. Princeton, NJ: Princeton University
Waldman, Michael. 2012. “Theory and Evidence on Internal Labor Markets.” Forthcoming in R.
Gibbons and J. Roberts (eds.), Handbook of Organizational Economics. Princeton, NJ: Princeton
University Press.
4.1 Pay for Performance
Basic Theory and Evidence
Lazear, Edward. 2000. “Performance Pay and Productivity.” American Economic Review 90:
Ferrall, Christopher and Bruce Shearer. 1999. “Incentives and Transactions Costs Within the Firm:
Estimating an Agency Model Using Payroll Records.” Review of Economic Studies 66: 309-38.
Shearer, Bruce. 2004. “Piece Rates, Fixed Wages and Incentives: Evidence from a Field
Experiment.” Review of Economic Studies 71: 513-34.
Knez, Marc and Duncan Simester. 2001. “Firm-Wide Incentives and Mutual Monitoring at
Continental Airlines.” Journal of Labor Economics 19: 743-72.
Hamilton, Barton, Jack Nickerson, and Hideo Owan. 2003. “Team Incentives and Worker
Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation.”
Journal of Political Economy 111: 465-97.
Bandiera, Oriana, Iwan Barankay, and Imran Rasul. 2007. “Incentives for Managers and
Inequality Among Workers: Evidence from a Firm Level Experiment.” Quarterly Journal of
Economics 122: 729-73.
Boning, Brent, Casey Ichniowski, and Kathryn Shaw. 2007. “Opportunity Counts: Teams and the
Effectiveness of Production Incentives.” Journal of Labor Economics 25: 613-50.
Alston, Lee, and Robert Higgs. 1982. “Contractual Mix in Southern Agriculture since the Civil
War: Facts, Hypotheses, and Test.” Journal of Economic History 42:327-53.
Burtis, Andrew and John Gabarro. 1996. “Brainard, Bennis & Farrell.” Harvard Business School
Case #9-485-037.
Kerr, Steven. 1975. “On the Folly of Rewarding A, While Hoping for B.” Academy of
Management Journal 18:769-83.
Readings in Organizational Economics
August ‘10 13 R. Gibbons
Healy, Paul. 1985. "The Effect of Bonus Schemes on Accounting Decisions," Journal of
Accounting and Economics 7: 85-107.
Anderson, Kathryn, Richard Burkhauser, and Jennie Raymond. 1993. “The Effect of Creaming on
Placement Rates under the Job Training Partnership Act.” Industrial and Labor Relations Review
Cragg, Michael. 1997. “Performance Incentives in the Public Sector: Evidence from the Job
Training Partnership Act.” Journal of Law, Economics, and Organization 13: 147-68.
Brown, Keith, W. Harlow, and Laura Starks. 1996. “Of Tournaments and Temptations: An
Analysis of Managerial Incentives in the Mutual Fund Industry.” Journal of Finance 51:85-110.
Chevalier, Judith and Glen Ellison. 1997. “Risk Taking by Mutual Funds as a Response to
Incentives.” Journal of Political Economy 105:1167-1200.
Oyer, Paul. 1998. “Fiscal Year Ends and Nonlinear Incentive Contracts: The Effect on Business
Seasonality.” Quarterly Journal of Economics 113:149-85.
Dranove, David, Daniel Kessler, Mark McClellan, and Mark Satterthwaite. 2003. “Is More
Information Better? The Effects of ‘Report Cards’ on Health Care Providers.” Journal of Political
Economy 111: 555-88.
Courty, Pascal, and Gerald Marschke. 2004. “An Empirical Investigation of Gaming Responses to
Explicit Performance Incentives.” Journal of Labor Economics 22: 23-56.
Larkin, Ian. 2007. “The Cost of High-Powered Incentives: Employee Gaming in Enterprise
Software Sales.” Unpublished manuscript, Harvard Business School.
Aggarwal, Rajesh and Andrew Samwick. 1999. “The Other Side of the Tradeoff: The Impact of
Risk on Executive Compensation.” Journal of Political Economy 107: 65-105.
Murphy, Kevin J. 1999. “Executive Compensation.” Chapter 38 in Volume 3B of O. Ashenfelter
and D. Card (eds.), Handbook of Labor Economics, North Holland.
Bertrand, Marianne, and Sendhil Mullainathan. 2001. “Do CEOs Set Their Own Pay? The Ones
Without Principals Do.” Quarterly Journal of Economics116: 901-32.
Bertrand, Marianne, and Sendhil Mullainathan. 2002. “Enjoying the Quiet Life? Corporate
Governance and Managerial Preferences.” Journal of Political Economy 111: 1043-75.
Gabaix, Xavier and Augustin Landier. 2008. “Why Has CEO Pay Increased So Much?.” Quarterly
Journal of Economics 123: zz-ww.
Tervio, Marko. 2008. “The Difference that CEOs Make: An Assignment Model Approach.”
Forthcoming in American Economic Reivew 98: xx-yy.
Lazear, Edward, and Sherwin Rosen. 1981. “Rank-Order Tournaments as Optimum Labor
Contracts.” Journal of Political Economy 89: 841-864.
Readings in Organizational Economics
August ‘10 14 R. Gibbons
Murphy, Kevin J. 1985. “Corporate Performance and Managerial Remuneration: An Empirical
Analysis.” Journal of Accounting and Economics 7:11-42.
Eriksson, Tor. 1999. “Executive Compensation and Tournament Theory: Empirical Tests on
Danish Data.” Journal of Labor Economics 17: 262-80.
Lazear, Edward. 1989. “Pay Equality and Industrial Politics.” Journal of Political Economy
Meyer, Margaret. 1991. “Learning from Coarse Information: Biased Contests and Career
Profiles.” Review of Economic Studies 58: 15-42.
Audas, Rick, Tim Barmby, and John Treble. 2004. “Luck, Effort, and Reward in an
Organizational Hierarchy.” Journal of Labor Economics 22: 379-95.
Fast, Norman, and Norman Berg. 1975. “The Lincoln Electric Company.” Harvard Business
School Case #376-028.
Stewart, James. 1993. “Taking the Dare.” The New Yorker, July 26, 1993: 34-39.
Baker, George, Robert Gibbons, and Kevin J. Murphy. 1994. “Subjective Performance Measures
in Optimal Incentive Contracts.” Quarterly Journal of Economics 109:1125-56.
Hayes, Rachel and Scott Schaefer. 2000. "Implicit contracts and the Explanatory Power of Top
Executive Compensation for Future Performance." RAND Journal of Economics 31: 273-93.
Che, Yeon-Koo, and Seung-Weon Yoo. 2001. “Optimal Incentives for Teams.” American
Economic Review 91: 525-41.
Levin, Jonathan. 2002. “Multilateral Contracting and the Employment Relationship.” Quarterly
Journal of Economics 117: 1075-1103.
MacLeod, Bentley. 2003. “Optimal Contracting with Subjective Evaluation.” American Economic
Review 93: 216-40.
Kvaløy, Ola and Trond Olsen. 2006. “Team Incentives in Relational Employment Contracts.”
Journal of Labor Economics 24: 139-69.
Rayo, Luis. 2007. “Relational Incentives and Moral Hazard in Teams.” Review of Economic
Studies 74: 937-63.
MacLeod, W. Bentley, and James Malcomson. 1988. “Reputation and Hierarchy in Dynamic
Models of Employment.” Journal of Political Economy 96: 832-854.
Stein, Jeremy. 1989. “Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate
Behavior.” Quarterly Journal of Economics 104: 655-69.
Gibbons, Robert, and Kevin J. Murphy. 1992. “Optimal Incentive Contracts in the Presence of
Career Concerns: Theory and Evidence.” Journal of Political Economy 100: 468-505.
Readings in Organizational Economics
August ‘10 15 R. Gibbons
Jeon, Seonghoon. 1996. “Moral hazard and reputational concerns in teams: Implications for
organizational choice.” International Journal of Industrial Organization 14: 297-315.
Chevalier, Judith and Glenn Ellison. 1999. “Career Concerns of Mutual Fund Managers.”
Quarterly Journal of Economics 114: 389-432.
Morris, Stephen. 2001. “Political Correctness.” Journal of Political Economy 109: 231-65.
Ortega, Jaime. 2003. “Power in the Firm and Managerial Career Concerns.” Journal of Economics
and Management Strategy 12: 1-29.
Ottaviani, Marco and Peter Sorensen. 2006. “Professional Advice.” Journal of Economic Theory
Bar-Isaac, Heski. 2007. “Something to Prove: Reputation in Teams.” RAND Journal of Economics
Hertzberg, Andrew, Jose Maria Liberti, and Daniel Paravisini. 2008. “Information and Incentives
Inside the Firm: Evidence from Loan Officer Rotation.” Unpublished manuscript, Columbia
Roy, Donald. 1952. “Quota Restriction and Goldbricking in a Machine Shop,” American Journal
of Sociology 57:427-42.
Lazear, Edward. 1986. “Salaries and Piece Rates.” Journal of Business 59:405-431.
Gibbons, Robert. 1987. “Piece-Rate Incentive Schemes.” Journal of Labor Economics 5:413-29.
Kanemoto, Yoshitsugu, and Bentley MacLeod. 1991. “The Ratchet Effect and the Market for
Secondhand Workers.” Journal of Labor Economics 10:85-98.
Carmichael, Lorne, and Bentley MacLeod. 2000. “Worker Cooperation and the Ratchet Effect.”
Journal of Labor Economics 18: 1-19.
Kaarbøe, Oddvar and Trond Olsen. 2008. “Distorted Performance Measures and Dynamic
Incentives.” Journal of Economics and Management Strategy 17: 149-83.
Intrinsic Motivation and Reciprocity
Pfeffer, Jeffrey. 1990. “Incentives in Organizations: The Importance of Social Relations.” In O.E.
Williamson (ed.), Organization Theory: From Chester Barnard to the Present and Beyond. New
York: Oxford University Press.
Frey, Bruno and F. Oberholzer-Gee. 1997. “The Cost of Price Incentives: An Empirical Analysis
of Motivation Crowding-Out.” American Economic Review 87: 746-55.
Kreps, David. 1997. “Intrinsic vs. Extrinsic Motivation.” American Economic Review 87: 359-64.
Gneezy, Uri and Aldo Rustichini. 2000. “Pay Enough or Don’t Pay at All.” Quarterly Journal of
Economics 115: 791-810.
Readings in Organizational Economics
August ‘10 16 R. Gibbons
Nagin, Daniel, James Rebitzer, Seth Sanders, and Lowell Taylor. 2002. “Monitoring, Motivation,
and Management: The Determinants of Opportunistic Behavior in a Field Experiment.” American
Economic Review 92: 850-73.
Rotemberg, Julio. 1994. “Human Relations in the Workplace.” Journal of Political Economy
Rotemberg, Julio. 2003. “Altruism, Reciprocity and Cooperation in the Workplace.” Forthcoming
in L.-A. Gerard-Varet, S.-C. Kolm, and J.M. Ythier, Handbook on the Economics of Giving,
Reciprocity and Altrusim. Amsterdam: North Holland.
Fehr, Ernst and Armin Falk. 2002. “Psychological foundations of incentives.” European Economic
Review 46: 687-724.
Bandiera, Oriana, Iwan Barankay, and Imran Rasul. 2005. “Social Preferences and the Response
to Incentives: Evidence from Personnel Data.” Quarterly Journal of Economics 120: 917-62.
Bénabou, Roland and Jean Tirole. 2006. “Incentives and Prosocial Behavior.” American Economic
Review 96: 1652-78.
4.2 Job Assignment and Job Design
Brüderl, Josef, Andreas Diekmann, and Peter Preisendörfer. 1991. “Patterns of Intraorganizational
Mobility: Tournament Models, Path Dependency, and Early Promotion Effects.” Social Science
Research 20:197-216.
Chiappori, Pierre-André, Bernard Salanié, and Julie Valentin. 1999. “Early Starters versus Late
Beginners.” Journal of Political Economy 107: 731-60.
Waldman, Michael. 1984. “Job Assignment, Signaling, and Efficiency.” RAND Journal of
Economics 15:255-87.
Murphy, Kevin. 1986. “Incentives, learning, and compensation: a theoretical and empirical
investigation of managerial labor contracts.” Rand Journal of Economics 17:59-76.
Milgrom, Paul, and Sharon Oster. 1987. “Job Discrimination, Market Forces, and the Invisibility
Hypothesis.” Quarterly Journal of Economics 102: 453-76.
Ricart i Costa, Joan. 1988. “Managerial Task Assignments and Promotions.” Econometrica 56:
Bernhardt, Dan, and David Scoones. 1993. “Promotion, Turnover, and Preemptive Wage Offers.”
American Economic Review 84: 771-91.
Meyer, Margaret. 1994. “The dynamics of learning with team production: Implications for task
assignment.” Quarterly Journal of Economics 109: 1157-84.
Lazear, Edward. 2004. “The Peter Principle: A Theory of Decline.” Journal of Political Economy
Readings in Organizational Economics
August ‘10 17 R. Gibbons
Gibbons, Robert, Lawrence Katz, Thomas Lemieux, and Daniel Parent. 2005. “Comparative
Advantage, Learning, and Sectoral Wage Determination.” Journal of Labor Economics 23: 681-
Golan, Limor. 2005. “Counteroffers and Efficiency in Labor Markets with Asymmetric
Information.” Journal of Labor Economics 23: 373-93.
Itoh, Hideshi. 1994. “Job Design, Delegation, and Cooperation: A Principal-Agent Analysis.”
European Economic Review 38: 691-700.
Hemmer, Thomas. 1995. “On the interrelation between production technology, job design, and
incentives.” Journal of Accounting and Economics 19: 209-45.
Prendergast, Canice. 1996. “A Theory of Responsibility in Organizations.” Journal of Labor
Economics 13: 387-400.
Meyer, Margaret, Trond Olsen, and Gaute Torsvik. 1996. “Limited Intertemporal Commitment
and Job Design.” Journal of Economic Behavior and Organization 31: 401-17.
Valsecchi, I. 1996. “Policing team production through job design.” Journal of Law, Economics,
and Organization 12: 361-75.
Hemmer, Thomas. 1998. “Performance measurement systems, incentives, and the optimal
allocation of responsibilities.” Journal of Accounting and Economics 25: 321-47.
Dewatripont, Mathias and Jean Tirole. 1999. “Advocates.” Journal of Political Economy 107: 1-
Olsen, Trond, and Gaute Torsvik. 2000. “Discretion and incentives in organizations.” Journal of
Labor Economics 18: 377-404.
Itoh, Hideshi. 2001. “Job design and incentives in hierarchies with team production.” Hitotsubashi
Journal of Commerce and Management 36: 1-17.
Harstad, Bård. 2007. “Organizational Form and the Market for Talent.” Journal of Labor
Economics 25: 581-611.
Schöttner, Anja. 2007. “Relational Contracts, Multitasking, and Job Design.” Journal of Law,
Economics, and Organization 23: yy-zz.
4.3 Skill Development
Wiggenhorn, William. 1990. “Motorola U: When Training Becomes an Education.” Harvard
Business Review July-August, 71-83.
Prendergast, Canice. 1993. “The Role of Promotion in Inducing Specific Human Capital
Acquisition.” Quarterly Journal of Economics 108:523-34.
Kahn, Charles, and Gur Huberman. 1988. “Two-sided Uncertainty and ‘Up-or-Out’ Contracts.”
Journal of Labor Economics. 6:423-44.
Readings in Organizational Economics
August ‘10 18 R. Gibbons
Waldman, Michael. 1990. “Up-or-Out Contracts: A Signaling Perspective,” Journal of Labor
Economics 8: 230-50.
Prendergast, Canice. 1992. “Career Development and Specific Human Capital Collection.”
Journal of the Japanese and International Economies 6: 207-27.
Chang, Chun, and Yijiang Wang. 1995. “A Framework for Understanding Differences in Labor
Turnover and Human Capital Investment.” Journal of Economic Behavior and Organization 28:
Chang, Chun, and Yijiang Wang. 1996. “Human Capital Investment under Asymmetric
Information: The Pigovian Conjecture Revisited.” Journal of Labor Economics 14: 505-19.
Acemoglu, Daron, and J. Stephen Pischke. 1998. “Why Do Firms Train? Theory and Evidence.”
Quarterly Journal of Economics 113:79-119.
Athey, Susan, Christopher Avery, and Peter Zemsky. 2000. “Mentoring and Diversity.” American
Economic Review 90: 765-86.
Autor, David. 2001. “Why Do Temporary Help Firms Provide Free General Skills Training?”
Quarterly Journal of Economics 116: 1409-48.
Owan, Hideo. 2004. “Promotion, Turnover, Earnings, and Firm-Sponsored Training.” Journal of
Labor Economics 22: 955-78.
Bernhardt, Dan, Eric Hughson, and Edward Kutsoati. 2006. “The Evolution of Managerial
Expertise: How Corporate Culture Can Run Amok.” American Economic Review 96: 195-221.
4.4 Networks and Demography
Networks and Employment
Granovetter, Mark. 1974. Getting a Job: A Study of Contacts and Careers. Cambridge: Harvard
University Press.
Montgomery, James. 1991. “Social Networks and Labor-Market Outcomes: Toward an Economic
Analysis.” American Economic Review 81: 1408-18.
Podolny, Joel, and James Baron. 1997. “Resources and Relationships: Social Networks and
Mobility in the Workplace.” American Sociological Review 62: 673-93.
Fernandez, Roberto, and Nancy Weinberg. 1997. “Sifting and Sorting: Personal Contacts and
Hiring in a Retail Bank.” American Sociological Review 62: 883-902.
Fernandez, Roberto, Emilio Castilla, and Paul Moore. 1999. “Social Capital at Work: Networks
and Employment at a Phone Center.” American Journal of Sociology 105: 1288-356.
Organizational Demography
Pfeffer, Jeffrey. 1983. “Organizational Demography.” In L. Cummings and B. Staw (eds.),
Research in Organizational Behavior. Greenwich, CT: JAI Press.
O’Reilly, Charles, David Caldwell, and William Barnett. 1989. “Work Group Demography, Social
Integration, and Turnover.” Administrative Science Quarterly 34: 21-37.
Readings in Organizational Economics
August ‘10 19 R. Gibbons
Sorensen, Jesper. 2000. “Changes in Group Composition and Turnover: A Longitudinal Study.”
American Sociological Review 65: 298-310.
Williams, Katherine, and Charles O’Reilly. 1998. “Demography and Diversity in Organizations: A
Review of 40 Years of Research.” Research in Organizational Behavior 20: 77-140.
4.5 Employment Systems
Brown, Claire, and Michael Reich. 1989. “When Does Union-Management Cooperation Work? A
Look at NUMMI and GM-Van Nuys.” California Management Review Summer, 26-44.
Adler, Paul. 1992. “The ‘Learning Bureaucracy’: New United Motor Manufacturing, Inc.”
Research in Organizational Behavior 15: 111-94.
Holland, Philip, and Michael Beer. 1993. “People Express Airlines: Rise and Decline.” Harvard
Business School Case #9-490-012.
Osterman, Paul. 1994. “How Common is Workplace Transformation and Who Adopts It?”
Industrial and Labor Relations Review 47: 173-88.
Osterman, Paul. 2000. “Work Reorganization in an Era of Restructuring: Trends in Diffusion and
Effects on Employee Welfare.” Industrial and Labor Relations Review 53: 179-96.
Ichniowski, Casey, Kathryn Shaw, and Giovanna Prennushi. 1997. “The Effects of Human
Resource Management Practices on Productivity: A Study of Steel Finishing Lines.” American
Economic Review 87: 291-313.
Baron, James, Diane Burton, and Michael Hannan. 1999. “Engineering Bureaucracy: The Genesis
of Formal Policies, Positions, and Structures in High-Technology Firms.” Journal of Law,
Economics, and Organization 15: 1-41.
Baron, James, and Michael Hannan. 2002. “Organizational Blueprints for Success in High-Tech
Start-Ups: Lessons from the Stanford Project on Emerging Companies.” California Management
Review 44: 8-36.
Moriguchi, Chiaki. 2003. “Implicit Contracts, the Great Depression, and Institutional Change: A
Comparative Analysis of U.S. and Japanese Employment Relations, 1920-1940.” Journal of
Economic History 63: 625-65.
Moriguchi, Chiaki. 2005. “Did American Welfare Capitalists Breach Their Implicit Contracts?
Preliminary Findings from Company-level Data.” Industrial and Labor Relations Review 59: 51-
4.6 Careers in Organizations
Medoff, James, and Katharine Abraham. 1980. “Experience, Performance, and Earnings.”
Quarterly Journal of Economics 95:703-36.
Medoff, James, and Katharine Abraham. 1981. “Are Those Paid More Really More Productive?”
Journal of Human Resources 16:186-216.
Readings in Organizational Economics
August ‘10 20 R. Gibbons
Baker, George, Michael Gibbs, and Bengt Holmstrom. 1994. “The Internal Economics of the
Firm: Evidence from Personnel Data.” Quarterly Journal of Economics 109:881-919.
Baker, George, Michael Gibbs, and Bengt Holmstrom. 1994. “The Wage Policy of a Firm.”
Quarterly Journal of Economics 109:921-55.
Treble, John, Edwin van Gameren, Sarah Bridges, and Tim Barmby. 2001. “The internal
economics of the firm: further evidence from personnel data.” Labour Economics 8: 531-52.
Flabbi, Luca, and Andrea Ichino. 2001. “Productivity, seniority and wages: new evidence from
personnel data.” Labour Economics 8: 359-87.
Demougin, Dominique, and Aloysius Siow. 1994. “Careers in Ongoing Hierarchies.” American
Economic Review 84:1261-77.
Gibbons, Robert, and Michael Waldman. 1999. “A Theory of Wage and Promotion Dynamics
Inside a Firm.” Quarterly Journal of Economics 114: 1321-58.
Fairburn, James, and James Malcomson. 2001. “Performance, Promotion, and the Peter Principle.”
Review of Economic Studies 68: 45-66.
Lluis, Stéphanie. 2005. “The Role of Comparative Advantage and Learning in Wage Dynamics
and Intrafirm Mobility: Evidence from Germany.” Journal of Labor Economics 23: 725-67.
Gibbons, Robert and Michael Waldman. 2006. “Enriching a Theory of Wage and Promotion
Dynamics inside Firms.” Journal of Labor Economics 24: 59-107.
Hunnes, Arngrim. 2007. “Testing the Role of Comparative Advantage and Learning in Wage and
Promotion Dynamics.” Unpublished manuscript, Norwegian School of Economics and Business
Cabrales, Antonio, Antoni Calvó-Armengol, and Nicola Pavoni. 2008. “Social Preferences, Skill
Segregation, and Wage Dynamics.” Review of Economic Studies 75: 65-98.
5. STRUCTURES AND PROCESSES IN ORGANIZATIONS
Brynjolfsson, Erik and Paul Milgrom. 2012. “Complementarity in Organizations.” Forthcoming in
R. Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ:
Princeton University Press.
Garicano, Luis and Timothy Van Zandt. 2012. “Hierarchies and the Division of Labor.”
Forthcoming in R. Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics.
Princeton, NJ: Princeton University Press.
Gertner, Robert and David Scharfstein. 2012. “Resource Allocation within Firms.” Forthcoming in
R. Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ:
Princeton University Press.
Readings in Organizational Economics
August ‘10 21 R. Gibbons
Gibbons, Robert and Rebecca Henderson. 2012. “Relational Contracts, Managerial Practices and
Organizational Capabilities.” Forthcoming in R. Gibbons and J. Roberts (eds.), The Handbook of
Organizational Economics. Princeton, NJ: Princeton University Press.
Hermalin, Benjamin. 2012b. “Economic Models of Corporate Governance.” Forthcoming in R.
Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ:
Princeton University Press.
Mookherjee, Dilip. 2012. “Incentives in Hierarchies.” Forthcoming in R. Gibbons and J. Roberts
(eds.), The Handbook of Organizational Economics. Princeton, NJ: Princeton University Press.
5.1 Five Models of Hierarchy
Hierarchical Information Processing
Radner, Roy. 1992. “Hierarchy: The Economics of Managing.” Journal of Economic Literature
Radner, Roy. 1993. “The Organization of Decentralized Information Processing.” Econometrica
Bolton, Patrick and Mathias Dewatripont. 1994. “The Firm as a Communication Network.”
Quarterly Journal of Economics 109:809-39.
Van Zandt, Timothy. (1998). “Decentralized information processing in the theory of
organizations.” In M. Sertel (Ed.), Economic Design and Behavior, Proceedings of the XIth World
Congress of the International Economic Association, volume IV. London: Macmillan Press Ltd.
Van Zandt, Timothy. 1998. “Real-time decentralized information processing as a model of
organizations with boundedly rational agents.” Review of Economic Studies 66: 633-58.
Hierarchical Resource Allocation
Crémer, Jacques. 1980. “A Partial Theory of the Optimal Organization of a Bureaucracy.” The
Bell Journal of Economics 11: 683-93.
Geanakoplos, John and Paul Milgrom. 1991. “A Theory of Hierarchies Based on Limited
Managerial Attention.” Journal of the Japanese and International Economies 5:205-25.
Van Zandt, Timothy. 2003. “Real-Time Hierarchical Resource Allocation.” Unpublished
manuscript, INSEAD.
Mookherjee, Dilip and Stefan Reichelstein. 1997. “Budgeting and Hierarchical Control.” Journal
of Accounting Research 35: 129-55.
Hierarchical Monitoring
Williamson, Oliver. 1967. “Hierarchical Control and Optimal Firm Size.” Journal of Political
Economy 75: 123-38.
Calvo, Guillermo and Stanislaw Wellisz. 1978. “Supervision, Loss of Control, and the Optimum
Size of the Firm.” Journal of Political Economy 86: 943-52.
Readings in Organizational Economics
August ‘10 22 R. Gibbons
Calvo, Guillermo and Stanislaw Wellisz. 1979. “Supervision, Loss of Control, and the Optimum
Size of the Firm.” Journal of Political Economy 86: 943-52.
Qian, Yingyi. 1994. “Incentives and Loss of Control in an Optimal Hierarchy.” Review of
Economic Studies 61: 527-44.
Maskin, Eric, Yingyi Qian, and Chenggang Xu. 2000. “Incentives, Information, and
Organizational Form.” Review of Economic Studies 67: 359-78.
Qian, Yingyi, Gérard Roland, and Chenggang Xu: Coordination and Experimentation in M-Form
and U-Form Organizations.” Journal of Political Economy 114: 366-402.
Melumad, Nahum, Dilip Mookherjee, and Stefan Reichelstein. 1995. “Hierarchical
decentralization of incentive contracts.” Rand Journal of Economics 26: 654-72.
Hierarchical Problem Solving
Garicano, Luis. 2000. “Hierarchies and the Organization of Knowledge in Production.” Journal of
Political Economy 108: 874-904.
Hierarchical Decision Rights
Hart, Oliver and John Moore. 2005. “On the Design of Hierarchies: Coordination Versus
Specialization.” Journal of Political Economy 113: 675-702.
Marglin, Stephen. 1974. “What Do Bosses Do? The Origins and Functions of Hierarchy in
Capitalist Production.” Journal of Radical Political Economy 6:60-112.
Dow, Gregory. 1987. “The Function of Authority in Transaction Cost Economics.” Journal of
Economic Behavior and Organization 8:13-38.
Melumad, Nahum, Dilip Mookherjee, and Stefan Reichelstein. 1992. “A Theory of Responsibility
Centers.” Journal of Accounting and Economics 15: 445-84.
Melumad, Nahum, Dilip Mookherjee, and Stefan Reichelstein. 1997. “Contract Complexity,
Incentives, and the Value of Delegation.” Journal of Economics and Management Strategy 6: 257-
Baker, George, Robert Gibbons, and Kevin J. Murphy. 2001. “Bringing the Market Inside the
Firm?” American Economic Review Papers and Proceedings 91: 212-18.
Colombo, M. and M. Delmastro. 2004. “Delegation of Authority in Business Organizations: An
Empirical Test.” Journal of Industrial Economics 52: 53-80.
Mookerherjee, Dilip. 2006. “Decentralization, Hierarchies, and Incentives: A Mechanism Design
Perspective.” Journal of Economic Literture 44: 367-90.
Alonso, Ricardo and Niko Matouschek. 2007. “Relational Delegation.” Rand Journal of
Economics 38: 1070-89.
Readings in Organizational Economics
August ‘10 23 R. Gibbons
Acemoglu, Daron, Philippe Aghion, Claire Lelarge, John Van Reenen, and Fabrizio Zilibotti.
2007. “Technology, Information and the Decentralization of the Firm.” Quarterly Journal of
Economics 122: 1758-99.
Bloom, Nicholas, Raffaella Sadun, and John Van Reenen. 2009. “The Organization of Firms
Across Countries.” Unpublished manuscript, Stanford University.
5.3 Organizational Design
Mintzberg, Henry. 1981. “Organization Design: Fashion or Fit?” Harvard Business Review
January-February (Reprint 81106).
Aoki, Masahiko. 1986. “Horizontal vs. Vertical Information Structure of the Firm.” American
Economic Review 76: 970-83.
Drucker, Peter. 1988. “The Coming of the New Organization.” Harvard Business Review January-
February, 45-53 (Reprint 88105).
Salancik, Gerald and Huseyin Leblebici. 1988. “Variety and Form in Organizing Transactions: A
Generative Grammar of Organization.” Research in the Sociology of Organizations 6:1-31.
Bolton, Patrick and Joseph Farrell. 1990. “Decentralization, Duplication, and Delay.” Journal of
Political Economy 98:803-26.
Eccles, Robert, and Nitin Nohria. 1992. “On Structure and Structuring.” Chapter x in R. Eccles
and N. Nohria (eds.), Beyond the Hype: Rediscovering the Essence of Management. Boston:
Harvard University Press.
Rotemberg, Julio and Garth Saloner. 1994. “Benefits of Narrow Business Strategies.” American
Economic Review 84: 1330-49.
Rotemberg, Julio. 1999. “Process- versus Function-Based Hierarchies.” Journal of Economics &
Management Strategy 8: 453-87.
Kamps, Jaap and László Pólos. 1999. “Reducing Uncertainty: A Formal Theory of Organizations
in Action.” American Journal of Sociology 104: 1774-1810.
O’Leary, Michael, Wanda Orlikowski, and JoAnne Yates. 2002. “Distributed Work over the
Centuries: Trust and Control in the Hudson’s Bay Company, 1670-1826.” Chapter 2 in P. Hinds
and S. Kiesler (eds.), Distributed Work. Cambridge, MA: MIT Press.
Foss, Nicolai. 2003. “Selective Intervention and Internal Hybrids: Interpreting and Learning from
the Rise and Decline of the Oticon Spaghetti Organization.” Organization Science 14: 331-49.
Rajan, Raghuram and Julie Wulf. 2006. “The Flattening Firm: Evidence from Panel Data on the
Changing Nature of Corporate Hierarchies.” Review of Economics and Statistics 88: 759-73.
Garicano, Luis and Thomas Hubbard. 2008. “Managerial Leverage is Limited by the Extent of the
Market: Hierarchies, Specialization and the Utilization of Lawyers’ Human Capital”, Journal of
Law and Economics, forthcoming.
Nadler, David and Michael Tushman. 1997. Competing by Design: The Power of Organizational
Architecture. New York: Oxford University Press.
Readings in Organizational Economics
August ‘10 24 R. Gibbons
Thompson, James D. 1967. Organizations in Action. New York: McGraw-Hill.
Stinchcombe, Arthur. 2001. When Formality Works: Authority and Abstraction in Law and
Organizations. Chicago: University of Chicago Press.
Hansmann, Henry. 1988. "Ownership of the Firm," Journal of Law, Economics, and Organization
Gaynor, Martin and Paul J. Gertler. 1995. “Moral Hazard and Risk Spreading in Partnerships,”
Rand Journal of Economics 26(4): 591–613.
Pirrong, Craig. 2000. "A Theory of Financial Exchange Organization," Journal of Law and
Economics xx: yy-zz.
Morrison, Alan and William Wilhelm, Jr. 2004. “Partnership Firms, Reputation, and Human
Capital.” American Economic Review 94: 1682-92.
Levin, Jonathan and Steven Tadelis. 2005. “Profit Sharing and the Role of Professional
Partnerships.” Quarterly Journal of Economics 120: 131-71.
Doornik, Katherine. 2006. “Relational Contracting in Partnerships.” Journal of Economics and
Management Strategy 15: 517-48.
Contingency and Complementarities
Ghemawat, Pankaj. 1995. “Competitive Advantage and Internal Organization: Nucor Revisited.”
Journal of Economics & Management Strategy 3:685-717.
Milgrom, Paul, and John Roberts. 1995. “Complementarities and Fit: Strategy, structure, and
organizational change in manufacturing.” Journal of Accounting and Economics 19:179-208.
Thesmar, David and Mathias Thoenig. 2000. “Creative Destruction and Firm Organization
Choice.” Quarterly Journal of Economics 115: 1201-37.
Caroli, Eve and John van Reenen. 2001. “Skill-Biased Organizational Change? Evidence from a
Panel of British and French Establishments.” Quarterly Journal of Economics 116: 1449-92.
Bresnahan, Timothy, Erik Brynjolfsson, and Lorin Hitt. 2002. “Information Technology,
workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence.” Quarterly
Journal of Economics 117: 339-76.
Lawrence, Paul and Jay Lorsch. 1967. Organization and Environment: Managing Differentiation
and Integration. Boston, MA: Harvard Business School Press.
Baldwin, Carliss and Kim Clark. 2000. Design Rules: The Power of Modularity. Cambridge, MA:
5.4 Routines, Production, and Capabilities
Sonnenfeld, Jeffrey, and Meredith Lazo. 1992. “United Parcel Service (A) and (B).” Harvard
Business School Case #9-488-016 and -017.
Readings in Organizational Economics
August ‘10 25 R. Gibbons
Nelson, Richard, and Sidney Winter. 1982. “Organizational Capabilities and Behavior.” Chapter 5
in An Evolutionary Theory of Economic Change. Cambridge, MA: Harvard University Press.
Winter, Sidney. 1988. “On Coase, Competency, and the Corporation.” Journal of Law,
Economics, and Organization 4: 179-95.
Nelson, Richard. 1991. “Why Do Firms Differ, and How Does It Matter?” Strategic Management
Journal 12: 61-74.
March, James. 1991. “Exploration and Exploitation in Organizational Learning.” Organization
Science 2: 71-87.
Cohen, Michael and Paul Bacdayan. 1994. “Organizational routines are stored as procedural
memory.” Organization Science 5: 554-68.
Teece, David, Gary Pisano, and Amy Shuen. 1997. “Dynamic Capabilities and Strategic
Management.” Strategic Management Journal 18: 509-33.
Langlois, Richard and Nicolai Foss. 1999. “Capabilities and Governance: The Rebirth of
Production in the Theory of Economic Organization.” Kyklos 52: 201-18.
Kellogg, Katherine, Wanda Orlikowski, and JoAnne Yates. 2006. “Life in the Trading Zone:
Structuring Coordination Across Boundaries in Postbureaucratic Organizations.” Organization
Science 17: 22-44.
Gibbons, Robert. 2006. “What the Folk Theorem Doesn’t Tell Us.” Industrial and Corporate
Change 15: 381-86.
Bartel, Ann, Casey Ichniowski, and Kathryn Shaw. 2007. “How Does Information Technology
Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement, and
Worker Skills.” Quarterly Journal of Economics 122: 1721-58.
Bloom, Nicholas and John Van Reenen. 2007. “Measuring and Explaining Management Practices
Across Firms and Countries. Quarterly Journal of Economics 122: 1351-408.
Polanyi, Michael. 1966. The Tacit Dimension. New York: Anchor Day Books.
Leibenstein, Harvey. 1987. Inside the Firm: The Inefficiencies of Hierarchy. Cambridge, MA:
Harvard University Press.
5.5 Knowledge Management and Product Development
Henderson, Rebecca and Kim Clark. 1990. “Architectural Innovation: The Reconfiguration of
Existing Product Technologies and the Failure of Established Firms.” Administrative Science
Quarterly 35: 9-30.
Cohen, Wesley and Daniel Levinthal. 1990. “Absorptive Capacity: A New Perspective on
Learning and Innovation.” Administrative Science Quarterly 35: 128-52.
Henderson, Rebecca. 1993. “Underinvestment and incompetence as responses to radical
innovation: evidence from the photolithographic alignment equipment industry.” Rand Journal of
Economis 24:248-70.
Readings in Organizational Economics
August ‘10 26 R. Gibbons
Sorensen, Jesper and Toby Stuart. 2000. “Aging, Obsolescence and Organizational Innovation.”
Administrative Science Quarterly 45: 81-112.
Repenning, Nelson. 2001. “Understanding fire fighting in new product development.” Journal of
Product Innovation Management 18:285-300.
Orlikowski, Wanda. 2002. “Knowing in Practice: Enacting a Collective Capability in Distributed
Organizing.” Organization Science 13:249-73.
Nonaka, Ikujiro and Hirotaka Takeuchi. 1995. The Knowledge-Creating Company: How Japanese
Companies Create the Dynamics of Innovation. New York: Oxford University Press.
5.6 Growth and Change
Nanda, Ashish. 2002. “Family Feud: Andersen v. Andersen (A&B).”Harvard Business School
Cases #9-800-264 & -210.
Prescott, Edward, and Michael Visscher. 1980. “Organization Capital.” Journal of Political
Economy 88: 446-61.
March, James. 1981. “Footnotes to Organizational Change.” Administrative Science Quarterly 26:
Hannan, Michael and John Freeman. 1984. “Structural Inertia and Organizational Change.”
American Sociological Review 49: 149-64.
Meyer, Margaret, Paul Milgrom, and John Roberts. 1992. “Organizational Prospects, Influence
costs, and Ownership Changes.” Journal of Economics and Management Strategy 1: 9-35.
Schaefer, Scott. 1998. “Influence Costs, Structural Inertia, and Organizational Change.” Journal of
Economics & Management Strategy 7: 237-63.
Orlikowski, Wanda. 1996. “Improvising Organizational Transformation Over Time: A Situated
Change Perspective.” Information Systems Research 7: 63-92.
Rajan, Raghuram and Luigi Zingales. 2001. “The Firm as a Dedicated Hierarchy: A Theory of the
Origins and Growth of Firms.” Quarterly Journal of Economics 116: 805-51.
Siggelkow, Nicolaj. 2001. “Change in the presence of fit: The rise, the fall, and the renaissance of
Liz Claiborne.” Academy of Management Journal 44: 836-57.
Siggelkow, Nicolaj. 2002. “Evolution toward Fit.” Administrative Science Quarterly 47: 125-59.
Repenning, Nelson and John Sterman. 2002. “Capability Traps and Self-Confirming Attribution
Errors in the Dynamics of Process Improvement.” Administrative Science Quarterly 47: 265-95.
Rajan, Raghuram and Luigi Zingales. 2005. “Creating Constituencies for Reform.” Unpublished
manuscript, University of Chicago.
Penrose, Edith. 1959. The Theory of the Growth of the Firm. New York: Wiley.
Readings in Organizational Economics
August ‘10 27 R. Gibbons
6. THE BOUNDARY OF THE FIRM REVISITED
Gibbons, Robert. 2005. “Four Formal(izable) Theories of the Firm?” Journal of Economic
Behavior and Organization 58: 202-247 (Sections 4 and 5).
Lafontaine, Francine and Margaret Slade. 2007. “Vertical Integration and Firm Boundaries: The
Evidence.” Journal of Economic Literature 45: 629-85.
Bresnahan, Timothy and Jonathan Levin. 2012. “Vertical Integration and Market Structure.”
Forthcoming in R. Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics.
Princeton, NJ: Princeton University Press.
Hansmann, Henry. 2012. “Ownership and Organizational Form.” Forthcoming in R. Gibbons and
J. Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ: Princeton
University Press.
Kornhauser, Lewis and Bentley MacLeod. 2012. “Contracts Between Legal Persons.”
Forthcoming in R. Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics.
Princeton, NJ: Princeton University Press.
Lafontaine, Francine and Margaret Slade. 2012. “Contracting Between Firms: Evidence.”
Forthcoming in R. Gibbons and J. Roberts (eds.), The Handbook of Organizaitonal Economics.
Princeton, NJ: Princeton University Press.
Macher, Jeffrey and Barak Richman. 2008. “Transaction Cost Economics: An Assessment of
Empirical Research in the Social Sciences.” Business and Politics 10: 1-63.
David, Robert and Shin-Kap Han. 2004. “A Systematic Assessment of the Empirical Support for
Transaction Cost Economics.” Strategic Management Journal 25: 39-58.
Gibbons, Robert. 2010. “Transaction-Cost Economics: Past, Present, and Future?” Scandinavian
Journal of Economics 112: 263-88.
6.1 Vertical Integration: Classic Evidence and Commentary
Monteverde, Kirk and David Teece. 1982. “Supplier Switching Costs and Vertical Integration in
the Automobile Industry.” Bell Journal of Economics 13:206-13.
Anderson, Erin and David Schmittlein. 1984. “Integration of the Sales Force: An Empirical
Examination.” Rand Journal of Economics 15: 385-95.
Masten, Scott. 1984. “The Organization of Production: Evidence from the Aerospace Industry.”
Journal of Law and Economics 27: 403-17.
Joskow, Paul. 1985. “Vertical Integration and Long-Term Contracts: The Case of Coal-Burning
Electric Generation Plants.” Journal of Law, Economics, and Organization 1: 33-80.
Masten, Scott, James Meehan, and Edward Snyder. 1991. “The Costs of Organization.” Journal of
Law, Economics, and Organization 7: 1-25.
Readings in Organizational Economics
August ‘10 28 R. Gibbons
Klein, Benjamin. 1988. “Vertical Integration as Organizational Ownership: The Fisher Body-
General Motors Relationship Revisited.” Journal of Law, Economics, and Organization 4: 199-
Coase, Ronald. 2000. “The Acquisition of Fisher Body by General Motors.” Journal of Law and
Economics 43: 15-31.
Klein, Benjamin. 2000. “Fisher-General Motors and the Nature of the Firm.” Journal of Law and
Economics 43: 105-41.
Helper, Susan, John Paul MacDuffie, and Charles Sabel. 2000. “Pragmatic Collaborations:
Advancing Knowledge While Controlling Opportunism.” Industrial and Corporate Change 9:
Demsetz, Harold. 1988. “The Theory of the Firm Revisited.” Journal of Law, Economics and
Organization 4: 141-61.
Williamson, Oliver. 2002. “The Theory of the Firm as Governance Structure: From Choice to
Contract.” Journal of Economic Perspectives 16: 171-95.
Whinston, Michael. 2003. “On the Transaction Cost Determinants of Vertical Integration.”
Journal of Law, Economics, and Organization 19: 1-23.
Baker, George and Ricard Gil. 2012. “Clinical Papers in Organizational Economics.” Forthcoming
in R. Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ:
Princeton University Press.
6.2 Vertical Integration: Recent Theory and Evidence
Weber, Katherine Seger, and Linda Hill. 1995. “Rudi Gassner and the Executive Committee of
BMG International (A).” Harvard Business School Case #9-494-055.
Magnani, Dianna, and Cynthia Montgomery. 2001. “PepsiCo’s Restaurants.” Harvard Business
School Case #9-794-078.
Langlois, Richard, and Paul Robertson. 1989. “Explaining Vertical Integration: Lessons from the
American Automobile Industry.” Journal of Economic History XLIX: 361-75.
Bolton, Patrick, and Michael Whinston. 1993. “Incomplete Contracts, Vertical Integration, and
Supply Assurance.” Review of Economic Studies 60: 121-48.
Argyres, Nicholas. 1996. “Evidence on the Role of Firm Capabilities in Vertical Integration
Decisions.” Strategic Management Journal 17: 129-150.
Mullin, Joseph, and Wallace Mullin. 1997. “United States Steel’s Acquisition of Great Northern
Ore Properties: Vertical Foreclosure or Efficient Contractual Governance?” Journal of Law,
Economics, and Organization 13:74-100.
Poppo, Laura and Todd Zenger. 1998. “Testing Alternative Theories of the Firm: Transaction
Cost, Knowledge-Based, and Measurement Explanations for Make-or-Buy Decisions in
Information Services.” Strategic Management Journal 19: 853-77.
Readings in Organizational Economics
August ‘10 29 R. Gibbons
González-Díaz, Manuel, Benito Arruñada, and Alberto Fernández. 2000. “Causes of
subcontracting: evidence from panel data on construction firms.” Journal of Economic Behavior
and Organization 42: 167-87.
Baker, George, Robert Gibbons, and Kevin J. Murphy. 2002. “Relational Contracts and the
Theory of the Firm.” Quarterly Journal of Economics 117: 39-83.
Woodruff, Christopher. 2002. “Non-contractible Investment and Vertical Integration in the
Mexican Footwear Industry.” International Journal of Industrial Organization 20: 1197-1224.
Baker, George and Thomas Hubbard. 2003. “Make Versus Buy in Trucking: Asset Ownership,
Job Design, and Information.” American Economic Review 93: 551-572.
Nickerson, Jackson and Brian Silverman. 2003. “Why Aren’t All Truck Drivers Owner-
Operators? Asset Ownership and the Employment Relation in Interstate for-Hire Trucking.”
Journal of Economics and Management Strategy 12: 91-118.
Nickerson, Jackson and Brian Silverman. 2003. “Why Firms Want to Organize Efficiently and
What Keeps Them from Doing So: Inappropriate Governance, Performance, and Adaptation in a
Deregulated Industry.” Administrative Science Quarterly 48: 433-65.
Baker, George and Thomas Hubbard. 2004. “Contractibility and Asset Ownership: On-Board
Computers and Governance in U.S. Trucking.” Quarterly Journal of Economics 119: 1443-79.
Matouschek, Niko. 2004. “Ex Post Inefficiencies in a Property Rights Theory of the Firm.”
Journal of Law, Economics, and Organization 20: 125-47.
Azoulay, Pierre. 2004. “Capturing Knowledge Within and Across Firm Boundaries: Evidence
from Clinical Development.” American Economic Review 94: 1591-1612.
Andrabi, Tahir, Maitreesh Ghatak, and Asim Ijaz Khwaja. 2006. “Subcontractors for tractors:
Theory and evidence on flexible specialization, supplier selection, and contracting.” Journal of
Development Economics 79: 273-302.
Gil, Ricard. 2007. “’Make-or-Buy’ in Movies: Integration and Ex-post Renegotiation.”
International Journal of Industrial Organization 25: 643-56.
Baldwin, Carliss. 2008. “Where do transactions come from? Modularity, transactions, and the
boundaries of firms.” Industrial and Corporate Change 17: 155-95.
Gil, Ricard. 2009. “Revenue Sharing Distortions and Vertical Integration in the Movie Industry.”
Journal of Law, Economics, and Organization 25: 579-610.
Forbes, Silke and Mara Lederman. 2009. “Adaptation and Vertical Integration in the Airline
Industry.” American Economic Review 99: 1831-49.
Novak, Sharon and Scott Stern. 2009. “Complementarity Among Vertical Integration Decisions:
Evidence from Automobile Product Development.” Management Science 75: 1257-85.
Forbes, Silke and Mara Lederman. 2010. “Does Vertical Integration Affect Firm Performance?
Evidence from the Airline Industry.” Forthcoming, Rand Journal of Economics.
Levin, Jonathan and Steven Tadelis. 2010. “Contracting for Government Services: Theory and
Evidence from U.S. Cities.” Forthcoming, Journal of Industrial Economics.
Readings in Organizational Economics
August ‘10 30 R. Gibbons
6.3 Formal Contracts Between Firms
* Williamson, Oliver. 1983. “Credible Commitments: Using Hostages to Support Exchange.”
American Economic Review 73: 519-40.
Stinchcombe, Arthur. 1985. “Contracts as Hierarchical Documents.” Chapter 2 in A. Stinchcombe
and C. Heimer, Organization Theory and Project Management. Oslo: Norwegian University
Press. Reprinted as Chapter 6 in A. Stinchcombe (1990), Information and Organizations.
Berkeley: University of California Press.
Masten, Scott. 1988. “Equity, Opportunism, and the Design of Contractual Relations.” Journal of
Institutional and Theoretical Economics 144: 180-95.
Aghion, Philippe and Patrick Bolton. 1992. “An Incomplete Contracts Approach to Financial
Contracting.” Review of Economic Studies 59: 473-94.
Aghion, Philippe and Jean Tirole. 1994. “On the Management of Innovation.” Quarterly Journal
of Economics 109: 1185-1207.
Klein, Benjamin. 2000. “The Role of Incomplete Contracts in Self-Enforcing Relationships.”
Revue D’Économie Industrielle 92: 67-80.
Bajari, Patrick and Steven Tadelis. 2001. “Incentives versus transaction costs: a theory of
procurement contracts.” RAND Journal of Economics 32: 387-407.
Battigalli, Pierpaolo and Giovanni Maggi. 2002. “Rigidity, Discretion, and the Costs of Writing
Contracts.” American Economic Review 92: 798-817.
Baker, George, Robert Gibbons, and Kevin J. Murphy. 2010. “s Happens: Relational Adaptation
in Contracts, Firms, and Other Governance Structures.” MIT Working Paper.
Early Evidence from Transaction-Cost Economics
Masten, Scott and Keith Crocker. 1985. “Efficient Adaptation in Long-Term Contracts: Take-or-
Pay Provisions for Natural Gas.” American Economic Review 75: 1083-93.
Goldberg, Victor and John Erickson. 1987. “Quantity and Price Adjustment in Long-Term
Contracts: A Case Study of Petroleum Coke.” Journal of Law and Economics XXX: 369-98.
Joskow, Paul. 1987. “Contract Duration and Relationship-Specific Investment: Empirical
Evidence from Coal Markets.” American Economic Review 77:168-85.
Joskow, Paul. 1988. “Price Adjustment in Long-Term Contracts: The Case of Coal.” Journal of
Law and Economics 31: 47-83.
Crocker, Keith and Scott Masten. 1988. “Mitigating Contractual Hazard: Unilateral Options and
Contract Length.” Rand Journal of Economics 19: 327-43.
Joskow, Paul. 1990. “The performance of long-term contracts: further evidence from coal
markets.” Rand Journal of Economics 21: 251-74.
Crocker, Keith and Scott Masten. 1991. “Pretia ex Machina?: Prices and Process in Long Term
Contracts.” Journal of Law and Economics 34: 69-99.
Readings in Organizational Economics
August ‘10 31 R. Gibbons
Leffler, Keith and Randal Rucker. 1991. “Transaction Costs and the Efficient Organization of
Production: A Study of Timber-Harvesting Contracts.” Journal of Political Economy 99: 1060-87.
Crocker, Keith, and Kenneth Reynolds. 1993. “The efficiency of incomplete contracts: an
empirical analysis of air force engine procurement.” RAND Journal of Economics 24: 126-46.
Pirrong, Craig. 1993. “Contracting Practices in Bulk Shipping Markets: A Transactions Cost
Explanation.” Journal of Law and Economics 36: 937-76.
Masten, Scott and Stéphane Saussier. 2000. “Econometrics of Contracts: An Assessment of
Developments in the Empirical Literature on Contracting.” Revue d’Économie Industrielle 92:
Lerner, Josh and Robert Merges. 1998. “The Control of Technology Alliances: An Empirical
Analysis of the Biotechnology Industry.” Journal of Industrial Economics 46: 125-56
Anand, Bharat and Tarun Khanna. 2000. “The Structure of Licensing Contracts.” Journal of
Industrial Economics 48: 103-35.
Banerjee, Abhijit and Esther Duflo. 2000. “Reputation Effects and the Limits of Contracting: A
Study of the Indian Software Industry.” Quarterly Journal of Economics 115: 989-1017.
Arruñada, Benito, Luis Garicano, and Luis Vázquez. 2001. “Contractual Allocation of Decision
Rights and Incentives: The Case of Automobile Distribution.” Journal of Law, Economics, and
Organization 17: 257-84.
Kaplan, Steven and Per Strömberg. 2003. “Financial Contracting Theory Meets the Real World:
An Empirical Analysis of Venture Capital Contracts.” Review of Economic Studies 70: 281-315.
Elfenbein, Daniel and Josh Lerner. 2003. “Ownership and control rights in Internet portal
alliances, 1995-1999.” RAND Journal of Economics 34: 356-69.
Corts, Kenneth and Jasjit Singh. 2004. “The Effect of Repeated Interaction on Contract Choice:
Evidence from Offshore Drilling.” Journal of Law, Economics, and Organization 20: 230-60.
Kalnins, Arturs and Kyle Mayer. 2004. “Relationships and Hybrid Contracts: An Analysis of
Contract Choice in Information Technology.” Journal of Law, Economics, and Organization 20:
Mazeo, Michael. 2004. “Retail Contracting and Organizational Form: Alternatives to Chain
Affiliation in the Motel Industry.” Journal of Economics and Management Strategy 13: 599-615.
Lerner, Josh and Antoinette Schoar. 2005. “Does Legal Enforcement Affect Financial
Transactions? The Contractual Channel in Private Equity.” Quarterly Journal of Economics 120:
Robinson, David and Toby Stuart. 2007. “Financial Contracting in Biotech Strategic Alliances.”
Journal of Law and Economics 50: 559-96.
Tirole, Jean. 2009. “Cognition and Incomplete Contracts.” American Economic Review 99: 265-
Readings in Organizational Economics
August ‘10 32 R. Gibbons
Ryall, Michael and Rachelle Sampson. 2009. “Formal Contracts in the Presence of Relational
Enforcement Mechanisms: Evidence from Technology Development Projects.” Management
Science 55: 906-25.
Lerner, Josh and Ulrike Malmendier. 2010. “Contractibility and the Design of Research
Agreements.” American Economic Review 100: 214-46.
Lafontaine, Francine. 1992. “Agency Theory and Franchising: Some Empirical Results.” Rand
Journal of Economics 23: 263-83.
Lafontaine, Francine. 1993. “Contractual Arrangements as Signaling Devices: Evidence from
Franchising.” Journal of Law, Economics, and Organizations 9: 256-89.
Bhattacharyya, Sugato and Francine Lafontaine. 1995. “Double-Sided Moral Hazard and the
Nature of Share Contracts.” Rand Journal of Economics 26: 761-81
Lafontaine, Francine and Kathryn Shaw. 1999. “The Dynamics of Franchise Contracting:
Evidence from Panel Data.” Journal of Political Economy 107: 1041-80.
Brickley, James. 1999. “Incentive conflicts and contractual restraints: Evidence from franchising.”
Journal of Law and Economics XLII: 745-74.
Brickley, James. 2002. “Royalty Rates and Upfront Fees in Share Contracts: Evidence from
Franchising.” Journal of Law, Economics, and Organization 18: 511-35.
Lafontaine, Francine and Kathryn Shaw. 2005. “Targeting Managerial Control: Evidence from
Franchising.” RAND Journal of Economics 36: 131-50.
6.4 Relational Contracts Between Firms
Freeze, Karen and Gary Pisano. Gary. 1991. “Crown Equipment Corporation: Design Services
Strategy.” Harvard Business School Case #9-991-031.
Dyer, Jeffrey. 1996. “How Chrysler Created an American Keiretsu.” Harvard Business Review
July-August, 32-46.
Macaulay, Stewart. 1963. “Non Contractual Relations in Business: A Preliminary Study.”
American Sociological Review. 28: 55-67.
Macneil, Ian. 1978. “Contracts: Adjustments of long-term economic relations under classical,
neoclassical, and relational contract law.” Northwestern University Law Review. 192: 854-906.
Dore, Ronald. 1983. “Goodwill and the Spirit of Market Capitalism.” British Journal of Sociology
Palay, Thomas. 1984. “Comparative Institutional Economics: The Governance of Rail Freight
Contracting.” Journal of Legal Studies 13:265-87.
Klein, Benjamin. 1996. “Why Hold-ups Occur: The Self-Enforcing Range of Contractual
Relationships.” Economic Inquiry 34: 444-63.
Readings in Organizational Economics
August ‘10 33 R. Gibbons
Klein, Benjamin and Kevin M. Murphy. 1988. “Vertical Restraints as Contract Enforcement
Mechanisms.” Journal of Law and Economics 31: 265-97.
Klein, Benjamin and Kevin M. Murphy. 1997. “Vertical Integration as a Self-Enforcing
Contractual Arrangement.” American Economic Review 87: 415-20.
Kenney, Roy and Benjamin Klein. 2000. “How Block Booking Facilitated Self-Enforcing Film
Contracts.” Journal of Law and Economics 43: 427-36.
Klein, Benjamin. 2000. “The Role of Incomplete Contracts in Self-Enforcing Relationships.”
Revue D’Économie Industrielle 92: 67-80.
Libecap, Gary and James Smith. 1999. “The Self-Enforcing Provisions of Oil and Gas Unit
Operating Agreements: Theory and Evidence.” Journal of Law, Economics, and Organization 15:
McMillan, John, and Christopher Woodruff. 1999. “Dispute Prevention Without Courts in
Vietnam.” Journal of Law, Economics, and Organization 15: 637-58.
McMillan, John and Christopher Woodruff. 1999. “Interfirm Relationships and Informal Credit in
Vietnam.” Quarterly Journal of Economics 114: 1285-1320.
Johnson, Simon, John McMillan, and Christopher Woodruff. 2002. “Courts and Relational
Contracts.” Journal of Law, Economics, and Organization 18: 221-77.
Kranton, Rachel. 1996. “The Formation of Cooperative Relationships.” Journal of Law,
Economics, and Organization 12: 214-33.
Brown, Martin, Armin Falk, and Ernst Fehr. 2004. “Relational Contracts and the Nature of Market
Interactions.” Econometrica 72: 747-80.
Tunca, Tunay and Stefanos Zenios. 2006. “Supply Auctions and Relational Contracts for
Procurement.” Management & Service Operations Management 8: 43-67.
Battigalli, Pierpaolo and Giovanni Maggi. 2008. “Costly contracting in a long-term relationship.”
RAND Journal of Economics 39: 352-77.
Fehr, Ernst, Martin Brown, and Christian Zehnder. 2009. “On Reputation: A Microfoundation of
Contract Enforcement and Price Rigidity.” Economic Journal 119: 333-53.
Chassang, Sylvain. 2010. “Building Routines: Learning, Cooperation, and the Dynamics of
Incomplete Relational Contracts.” American Economic Review 100: 448-65.
McAdams, David. 2010. “Performance and Turnover in a Stochastic Partnership.” Unpublished
manuscript, Duke University.
6.5 Organizations and Industry Structure
Stigler, George. 1951. “The Division of Labor is Limited by the Extent of the Market.” Journal of
Political Economy 59: 195-93.
Lucas, Robert. 1978. “On the Size Distribution of Business Firms.” Bell Journal of Economics 9:
Readings in Organizational Economics
August ‘10 34 R. Gibbons
Rosen, Sherwin. 1982. “Authority, Control, and the Distribution of Earnings.” Bell Journal of
Economics 13:311-23.
Becker, Gary and Kevin M. Murphy. 1992. “The Division of Labor, Coordination Costs, and
Knowledge.” Quarterly Journal of Economics 107: 1137-60.
Kremer, Michael. 1993. “The O-Ring Theory of Economic Development.” Quarterly Journal of
Economics 108: 551-75.
Grossman, Gene and Elhanan Helpman. 2002. “Integration versus Outsourcing in Industry
Equilibrium.” Quarterly Journal of Economics 117: 85-120.
Garicano, Luis and Esteban Rossi-Hansberg. 2004. “Inequality and the Organization of
Knowledge.” American Economic Review 94: 197-202.
Garicano, Luis and Esteban Rossi-Hansberg. 2006. “Organization and Inequality in a Knowledge
Economy.” Quarterly Journal of Economics 121: 1383-1435.
Zame, William. 2007. “Incentives, Contracts, and Markets: A General Equilibrium Theory of
Firms.” Econometrica 75: 1453-1500.
Garicano, Luis and Thomas Hubbard. 2008. “Specialization, Firms, and Markets: The Division of
Labor Within and Between Law Firms.” Journal of Law, Economics, and Organization,
7. CORPORATE STRATEGY
Aoki, Masahiko. 1988. Information, Incentives and Bargaining in the Japanese Economy. New
York, NY: Cambridge University Press.
Roberts, John. 2004. The Modern Firm: Organizational Design for Performance and Growth.
Oxford: Oxford University Press, Chapters 5 and 6.
Azoulay, Pierre and Josh Lerner. 2012. “Technological Innovation and Organizations.”
Forthcoming in R. Gibbons and J. Roberts (eds.), Handbook of Organizational Economics.
Princeton, NJ: Princeton University Press.
Menard, Claude. 2012. “Hybrid Modes of Organization: Alliances, Joint Ventures, Networks, and
other ‘strange’ animals.” Forthcoming in R. Gibbons and J. Roberts (eds.), The Handbook of
Organizational Economics. Princeton, NJ: Princeton University Press.
Roberts, John and Garth Saloner. 2012. “Strategy and Organization.” Forthcoming in R. Gibbons
and J. Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ: Princeton
University Press.
7.1 Divisionalization and Conglomerates
Readings in Organizational Economics
August ‘10 35 R. Gibbons
Baker, George. 1992. “Beatrice: A Study in the Creation and Destruction of Value.” Journal of
Finance 47: 1081-1119.
Rukstad, Michael and David Collis. 2001. “The Walt Disney Company: The Entertainment King.”
Harvard Business School Case #9-701-035.
Williamson, Oliver. 1985. “The Modern Corporation.” Chapter 11 from The Economic Institutions
of Capitalism. New York: The Free Press.
Freeland, Robert. 1996. “The Myth of the M-Form? Governance, Consent, and Organizational
Change.” American Journal of Sociology 102: 483-526.
Argyres, Nicholas. 1995. “Technology strategy, governance structure and interdivisional
coordination.” Journal of Economic Behavior and Organization 28: 337-58.
Schoar, Antoinette. 2002. “Effects of Corporate Diversification on Productivity.” Journal of
Finance 57: 2379-2403.
Villalonga, Belén. 2004. “Diversification Discount or Premium? New Evidence from Business
Information Tracking Series Establishment-Level Data.” Journal of Finance 59: 475-502.
Villalonga, Belén. 2004. “Does Diversification Cause the ‘Diversification Discount’?” Financial
Management 33: 5-27.
Baldenius, Tim. 2006. “Ownership, incentives, and the hold-up problem.” RAND Journal of
Economics 37: 276-99.
Dessein, Wouter and Tano Santos. 2006. “Adaptive Organizations.” Journal of Political Economy
Alonso, Ricardo, Wouter Dessein, and Niko Matouschek. 2008. “When Does Coordination
Require Centralization?” American Economic Review 98: 145-79.
Rantakari, Heikki. 2008. “Governing Adaptation.” Review of Economic Studies 75: 1257-85.
McElheran, Kristina Steffenson. 2008. “Delegation in Multi-Divisional Firms: Determinants of the
Organizational Structure of I.T. Purchasing Authority.” Working paper, HBS.
Dessein, Wouter, Luis Garicano, and Robert Gertner. 2008. “Organizing for Synergies: Allocating
Control to Manage the Coordination-Incentives Tradeoff.” Unpublished manuscript, University of
Chandler, Alfred. 1962. Strategy and Structure. Cambridge, MA: MIT Press.
7.2 Beyond Divisionalization: Matrix, Network, and Other Organizational Forms
Miles, Raymond, and Charles Snow. 1992. “Causes of Failure in Network Organizations.”
California Management Review 34: 53-72.
Holland, Philip and Robert Eccles. 1989. “Jacobs Suchard: Reorganizing for 1992.” Harvard
Business School Case #9-489-106.
Bartlett, Christopher. 1993. “ABB’s Relays Business: Building and Managing a Global Matrix.”
Harvard Business School Case #9-394-016.
Readings in Organizational Economics
August ‘10 36 R. Gibbons
Rothbard, Nancy and John Kotter. 1993. “Kyocera Corporation.” Harvard Business School Case
Bartlett, Christopher and Sumantra Ghoshal. 1993. “Beyond the M-Form: Toward a Managerial
Theory of the Firm.” Strategic Management Journal 14: 23-46.
7.3 Resource Allocation and Transfer Pricing
Bolton, Patrick and David Scharfstein. 1998. “Corporate Finance, the Theory of the Firm, and
Organizations.” Journal of Economic Perspectives 12: 95-114.
Jensen, Michael and William Meckling. 1999. “Specific Knowledge and Divisional Performance
Measurement.” Journal of Applied Corporate Finance 12:8-17.
Zingales, Luigi. 2000. “In Search of New Foundations.” Journal of Finance 55:1623-53.
Stein, Jeremy. 2003. “Agency, Information, and Corporate Investment.” Chapter 2 in G.
Constantinides, M. Harris, and R. Stulz (eds.), Handbook of the Economics of Finance.
Amsterdam: North Holland. (Part Two)
Freeman, John. 1979. “Going to the Well: School District Administrative Intensity and
Environmental Constraint.” Administrative Science Quarterly 24:119-33.
Gertner, Robert, David Scharfstein, and Jeremy Stein. 1994. “Internal Versus External Capital
Markets.” Quarterly Journal of Economics 109:1211-1230.
Stein, Jeremy. 1997. “Internal Capital Markets and the Competition for Corporate Resources.”
Journal of Finance 52:111-33.
Scharfstein, David, and Jeremy Stein. 2000. “The Dark Side of Internal Capital Markets:
Divisional Rent-Seeking and Inefficient Investment.” Journal of Finance 55: 2537-64.
Scharfstein, David. 1997. “The Dark Side of Internal Capital Markets, II.” National Bureau of
Economic Research Working Paper #6352.
Imai, Ken-ichi and Hiroyuki Itami. 1984. “Interpenetration of Organization and Market: Japan’s
firm and Market in Comparison with the U.S.” International Journal of Industrial Organization 2:
Mullainathan, Sendhil, and David Scharfstein. 2001. “Do Firm Boundaries Matter?” American
Economic Review Papers and Proceedings 91: 195-99.
Eccles, Robert and Harrison White. 1988. “Price and Authority in Inter-Profit Center
Transactions.” American Journal of Sociology 94: S17-S51.
Holmstrom, Bengt, and Jean Tirole. 1991. “Transfer Pricing and Organizational Form.” Journal of
Law, Economics, and Organization 7: 201-28.
Bertrand, Marianne, Paras Mehta, and Sendhil Mullainathan. 2002. “Ferreting Out Tunneling: An
Application to Indian Business Groups.” Quarterly Journal of Economics 117: 121-48.
Robinson, David. 2008. “Strategic Alliances and the Boundaries of the Firm.” Forthcoming in
Reivew of Financial Studies.
Readings in Organizational Economics
August ‘10 37 R. Gibbons
Bower, Joseph. 1970. Managing the Resource Allocation Process. Boston, MA: Harvard Business
Eccles, Robert. 1985. The Transfer Pricing Problem: A Theory for Practice. D. C. Heath:
Lexington, MA.
Johnson, H. Thomas and Robert Kaplan. 1987. Relevance Lost: The Rise and Fall of Management
Accounting. Boston, MA: Harvard Business School Press.
7.4 Joint Ventures, Alliances, and Other Hybrids
Richardson, George. 1972. “The Organisation of Industry.” Economic Journal 82: 883-96.
Blois, K. 1972. “Vertical Quasi-Integration.” Journal of Industrial Economics 20: 253-72.
Eccles, Robert. 1981. “The Quasifirm in the Construction Industry.” Journal of Economic
Behavior and Organization 2: 335-57.
Mariti, P. and R. Smiley. 1983. “Co-Operative Agreements and the Organization of Industry.”
Journal of Industrial Economics 31: 437-51.
Hennart, Jean-Francois. 1993. “Explaining the Swollen Middle: Why Most Transactions Are a
Mix of ‘Market’ and ‘Hierarchy’.” Organization Science 4: 529-47.
Ménard, Claude. 1996. “On Clusters, Hybrids, and Other Strange Forms: The Case of the French
Poultry Industry.” Journal of Institutional and Theoretical Economics 152: 154-83.
Ménard, Claude. 2004. “The Economics of Hybrid Organizations.” Journal of Institutional and
Theoretical Economics 160 : 345-76.
McQuade, Krista and Benjamin Gomes-Casseres. 1992. “Xerox and Fuji Xerox.” Harvard
Business School Case #9-391-156.
Powell, Walter. 1990. “Neither Market Nor Hierarchy: Network Forms of Organization.”
Research in Organizational Behavior 12: 295-336.
Podolny, Joel, and Karen Page. 1998. “Network Forms of Organization.” Annual Review of
Sociology 24: 57-76.
Kogut, Bruce. 1989. "The Stability of Joint Ventures: Reciprocity and Competitive Rivalry."
Journal of Industrial Economics 38: 183-98.
Oxley, Joanne. 1997. “Appropriability hazards and Governance in Strategic Alliances: A
Transaction Cost Approach.” Journal of Law, Economics, and Organization 113: 387-409.
Zenger, Todd, and William Hesterly. 1997. “The Disaggregation of Corporations: Selective
Intervention, High-Powered Incentives, and Molecular Units.” Organization Science 8: 209-22.
Rey, Patrick and Jean Tirole. 2001. “Alignment of Interests and the Governance of Joint
Ventures.” Unpublished manuscript, University of Toulouse. http://idei.fr/activity.php?a=1377
Dessein, Wouter. 2005. “Information and Control in Alliances and Ventures.” Journal of Finance
Readings in Organizational Economics
August ‘10 38 R. Gibbons
Robinson, David and Toby Stuart. 2007. “Network Effects in the Governance of Strategic
Alliances.” Journal of Law, Economics, and Organization 23: 242-73.
Baker, George, Robert Gibbons, and Kevin J. Murphy. 2008. “Strategic Alliances: Bridges
Between ‘Islands of Conscious Power’.” Journal of the Japanese and International Economies 22:
Ménard, Claude and Emmanuel Raynaud. 2009. “Ulysses and the Sirens: Enforcing Commitment
in Multilateral Alliances.” Unpublished manuscript, University of Paris Pantheon-Sorbonne.
Hybrids and Innovation
Hunt, Brian and Josh Lerner. 1998. “Xerox Technology Ventures: March 1995.” Harvard Business
School Case #9-295-127.
Gompers, Paul and Josh Lerner. 199x. “The Determinants of Corporate Venture Capital Success:
Organizational Structure, Incentives, and Complementarities.” In R. Morck (ed.), Concentrated
Corporate Ownership. Chicago: University of Chicago Press.
Teece, David. 1992. “Competition, cooperation, and innovation: Organizational arrangements for
regimes of rapid technological progress.” Journal of Economic Behavior and Organization 18: 1-
Von Hippel, Eric. 1988. “Cooperation Between Rivals: The Informal Trading of Technical Know-
How.” Chapter 6 in E. von Hippel, The Sources of Innovation. New York: Oxford University
Powell, W.W., K.W. Koput and L Smith-Doerr. 1996. “Interorganizational Collaboration and the
Locus of Innovation: Networks of Learning in Biotechnology” Administrative Science Quarterly
Lazonick, William. 2002. “The Theory of Innovative Enterprise.” In W. Lazonick (ed.), IEBM
Handbook of Economics. Thomson Learning.
Anton, James, and Dennis Yao. 1995. “Start-ups, Spin-offs, and Internal Projects.” Journal of
Law, Economics, and Organization 11: 362-78.
Lazear, Edward. 2005. “Entrepreneurship.” Journal of Labor Economics 23: 649-80.
Hellmann, Thomas. 2005. “When do employees become entrepreneurs?” Unpublished manuscript,
University of British Columbia. http://strategy.sauder.ubc.ca/hellmann/
7.5 Multinational Corporations, International Trade, and FDI
Helpman, Elhanan. 1984. “A Simple Theory of International Trade with Multinational
Corporations.” Journal of Political Economy 92: 451-71.
Markusen, James. 1984. “Multinationals, Multi-Plant Economies, and the Gains from Trade.”
Journal of International Economics 16: 205-26.
Antras, Pol. 2003. “Firms, Contracts, and Trade Structure.” Quarterly Journal of Economics 118:
Readings in Organizational Economics
August ‘10 39 R. Gibbons
Yi, Kei-Mu. 2003. “Can Vertical Specialization Explain the Growth of World Trade?” Journal of
Political Economy 111: 52-102.
Grossman, Gene, and Elhanan Helpman. 2004. “Managerial Incentives and the International
Organization of Production.” Journal of International Economics 63: 237-62.
Antras, Pol and Elhanan Helpman. 2004. “Global Sourcing.” Journal of Political Economy 112:
Antras, Pol. 2005. “Incomplete Contracts and the Product Cycle.” American Economic Review 95:
Markusen, James. 2005. “Modeling the Offshoring of White-Collar Services: From Comparative
Advantage to the New Theories of Trade and FDI.” NBER Working Paper #11827, December.
Antras, Pol, Luis Garicano, and Esteban Rossi-Hansberg. 2006. “Offshoring in a Knowledge
Economy.” Quarterly Journal of Economics 121: 31-77.
Nunn, Nathan. 2007. “Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade.”
Quarterly Journal of Economics 122: 569-600.
7.6 Organizations and Industry Dynamics
Collis, David. 1996. “Birds Eye and the U.K. Frozen Food Industry (A&B).” Harvard Business
School Case #9-792-078.
Jovanovic, Boyan. 1982. “Selection and the Evolution of Industry.” Econometrica 50: 649-70.
Klepper, Steven. 1996. “Entry, Exit, Growth, and Innovation over the Product Life Cycle.”
American Economic Review 86: 562-83.
Klepper, Steven. 1997. “Industry Life Cycles.” Industrial and Corporate Change 6: 145-81.
Stein, Jeremy. 1997. “Waves of Creative Destruction: Firm-Specific Learning-by-Doing and the
Dynamics of Innovation.” Review of Economic Studies 64: 265-88.
Langlois, Richard. 1992. “External economies and economic progress: the case of the
microcomputer industry.” Business History Review 66: 1-50
Bresnahan, Timothy and Shane Greenstein. 1999. “Technological Competition and the Structure
of the Computer Industry.” Journal of Industrial Economics XLVII: 1-40.
8. INSTITUTIONS
Aoki, Masahiko. 2001. Toward a Comparative Institutional Analysis. Cambridge, MA: MIT Press.
Readings in Organizational Economics
August ‘10 40 R. Gibbons
Dixit, Avinash. 2009. “Governance Institutions and Economic Activity.” American Economic
Review 99: 5-24.
Banerjee, Abhijit, Rema Hanna, and Sendhil Mullainathan. 2012. “Corruption as a Problem of
Public and Private Governance.” Forthcoming in R. Gibbons and J. Roberts (eds.), The Handbook
of Organizational Economics. Princeton, NJ: Princeton University Press.
Moe, Terry. 2012. “Public Bureaucracy and the Theory of Political Control.” Forthcoming in R.
Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics. Princeton, NJ:
Princeton University Press.
Greif, Avner. 1997. “Microtheory and recent developments in the study of economic institutions
through economic history.” Pp. 79-113 in Volume II of D. Kreps and K. Wallis (eds.), Advances
in Economic Theory and Econometrics, New York: Cambridge University Press.
Greif, Avner. 1993. “Contract Enforceability and Economic Institutions in Early Trade: The
Maghribi Traders’ Coalition.” American Economic Review 83: 525-48.
Greif, Avner. 1994. “Cultural Beliefs and the Organization of Society: A Historical and
Theoretical Reflection on Collectivist and Individualist Societies.” Journal of Political Economy.
Kranton, Rachel. 1996. “Reciprocal Exchange: A Self-Sustaining System.” American Economic
Review 86:830-51.
Kranton, Rachel. 1996. “The Formation of Cooperative Relationships.” Journal of Law,
Economics, and Organization 12:214-33.
Sobel, Joel. 2002. “Can We Trust Social Capital?” Journal of Economic Literature 40: 139-54.
Sabel, Charles. 1993. “Studied Trust: Building New Forms of Cooperation in a Volatile
Economy.” Human Relations 46:1133-70.
Adams, Julia. 1996. “Principals and Agents, Colonialists and Company Men: The Decay of
Colonial Control in the Dutch East Indies.” American Sociological Review 61:12-28.
Kranton, Rachel and Anand Swamy. 2008. “Contracts, Hold-Up, and Exports: Textiles and Opium
in Colonial India.” Forthcoming in American Economic Review.
Milgrom, P., D. North, and B. Weingast. 1990. “The Role of Institutions in the Revival of Trade:
The Law Merchant, Private Judges, and the Champagne Fairs.” Economics and Politics 2:1-23.
Calvert, Randall. 1995. “Rational Actors, Equilibrium, and Social Institutions.” in J. Knight and I.
Sened (eds.) Explaining Social Institutions. Ann Arbor, MI: The University of Michigan Press.
Greif, Avner, Paul Milgrom, and Barry Weingast. 1994. “Coordination, Commitment, and
Enforcement: The Case of the Merchant Guild.” Journal of Political Economy 102:745-76.
Dixit, Avinash. 2003. “Trade Expansion and Contract Enforcement.” Journal of Political
Economy 1111: 1293-1317.
Dixit, Avinash. 2003. “On Modes of Economic Governance.” Econometrica 71: 449-81.
Readings in Organizational Economics
August ‘10 41 R. Gibbons
Pyle, William. 2005. “Contractual Disputes and the Channels for Interfirm Communication.”
Journal of Law, Economics, and Organization 21: 547-75.
Wilson, James Q. 1989. “Compliance.” Chapter 9 in Bureaucracy: What Government Agencies
Do and Why They Do It. New York: Basic Books.
Tirole, Jean. 1994. “The Internal Organization of Government.” Oxford Economic Papers 46:1-
Banerjee, Abhijit. 1997. “A Theory of Misgovernance.” Quarterly Journal of Economics
McCubbins, Mathew and Thomas Schwartz. 1984. “Police Patrols vs. Fire Alarms.” Journal of
Political Science 28:165-79.
Lupia, Arthur and Mathew McCubbins. 1994. “Learning from Oversight: Fire Alarms and Police
Patrols Reconstructed.” Journal of Law, Economics, and Organization 10:96-125.
McCubbins, Mathew, Roger Noll, and Barry Weingast. 1987. “Administrative Procedures as
Instruments of Political Control.” Journal of Law, Economics, and Organization 3:243-77.
Kiser, Edgar and Joachim Schneider. 1994. “Bureaucracy and Efficiency: An Analysis of Taxation
in Early Modern Prussia.” American Sociological Review 59:187-204.
Moe, Terry. 1990. “The Politics of Structural Choice: Toward a Theory of Public Bureaucracy.”
In O.E. Williamson (ed.), Organization Theory: From Chester Barnard to the Present and
Beyond. New York: Oxford University Press.
Moe, Terry. 1997. “The Positive Theory of Public Bureaucracy.” In D. Mueller (ed.), Perspectives
on Public Choice: A Handbook. New York: Cambridge University Press.
Gailmard, Sean. 2002. “Expertise, Subversion, and Bureaucratic Discretion.” Journal of Law,
Economics, and Organization 18:536-55.
Allen, Douglas. 2002. “The British Navy Rules: Monitoring and Incompatible Incentives in the
Age of Fighting Sail.” Explorations in Economic History 39: 204-31.
Huang, Yasheng. 2002. “Managing Chinese Bureaucrats: An Institutional Economics
Perspective.” Political Studies 50:61-79.
Prendergast, Canice. 2003. “The Limits of Bureaucratic Efficiency.” Journal of Political Economy
Prendergast, Canice. 2007. “The Motivation and Bias of Bureaucrats.” American Economic
Review 97: 180-96.
Readings in Organizational Economics
August ‘10 42 R. Gibbons
North, D. and B. Weingast. 1989. “Constitutions and Commitment: The Evolution of Institutions
Governing Public Choice in Seventeenth-Century England.” The Journal of Economic History
Stasavage, David. 2002. “Credible Commitment in Early Modern Europe: North and Weingast
Revisited.” Journal of Law, Economics, and Organization 18: 155-86.
Padgett, John, and Chris Ansell. 1992. “Robust Action and the Rise of the Medici.” American
Journal of Sociology 98:1259-1320.
Greif, Avner. 1994. “On the Political Foundations of the Late Medieval Commercial Revolution:
Genoa During the Twelfth and Thirteenth Centuries.” Journal of Economic History 54:271-87.
Greif, Avner. 1998. “Self-Enforcing Political Systems and Economic Growth: Late Medieval
Genoa.” Chapter 2 in R. Bates, A. Greif, M. Levi, J.-L. Rosenthal, and B. Weingast, Analytic
Narratives. Princeton, NJ: Princeton University Press.
Weingast, B. 1995. “The Economic Role of Political Institutions: Market-Preserving Federalism
and Economic Development.” Journal of Law, Economics, and Organization 11:1-31.
Weingast, Barry. 1997. “The Political Foundations of Democracy and the Rule of Law.” American
Political Science Review 91:245-63.
De Figueiredo, Rui and Barry Weingast. 2005. “Self-Enforcing Federalism.” Journal of Law,
Economics, and Organization 21: 103-35.
Grossman, Herschel and Suk Jae Noh. 1994. “Proprietary public finance and economic welfare.”
Journal of Public Economics 53: 187-204.
Moselle, Boaz and Ben Polak. 2001. “A Model of a Predatory State.” Journal of Law, Economics,
and Organization 17: 1-33.
Acemoglu, Daron and James Robinson. 2000. “Why Did the West Extend the Franchise?
Democracy, Inequality, and Growth in Historical Perspective.” Quarterly Journal of Economics
Acemoglu, Daron and James Robinson. 2001. “A Theory of Political Transitions.” American
Economic Review 91: 938-63.
Acemoglu, Daron and Simon Johnson. 2003. “Unbundling Institutions.” NBER Working Paper
Acemoglu, Daron. 2003. “Why Not a Political Coase Theorem? Social Conflict, Commitment and
Politics.” Journal of Comparative Economics 31: 620-52.
Acemoglu, Daron. 2005. “Politics and Economics in Weak and Strong States.” Journal of
Monetary Economics 52: 1199-1226.
Phelan, Christopher. 2006. “Public trust and government betrayal.” Journal of Economic Theory
Readings in Organizational Economics
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