The institutional and political ontology of the firm

Abstract

The paper begins by specifying that it examines the institutional ontology of the firm, not only that of the corporation. It views firms as structured cooperative endeavors, emergent entities ontologically irreducible to their composing elements that exist by virtue of two distinct kinds of institutions: i) cooperative behavioral norms that emerge from interpersonal interactions between workers and account for horizontal cooperation, and ii) compliance with authority norms, related to the constitutive rules that ground organizational structures and account for vertical, subordinate, cooperation. The argument is that the deontic nature of these two institutions explains both firms’ cohesiveness and efficiency, an argument that radically breaks with agency theory’s denial of authority and individualistic ontology. A theory of the firm qua corporation (regarded as constituted by three parties - shareholders, workers and authority structures) as well as appropriate governance forms (industrial democracy, codetermination) are derived from the advanced ontological claims.