Economic organizations and the structure of the economy

The corporation - traditional and modern

Strategy

• goals and objectives

Structure

• management and ownership

• ownership and control

Problems of the modern corporation in a changing economic environment

• standardization

• hierarchical control

• organizational rigidity

• short-term horizons

• paper-entrepreneurs

Structure and Role of Finance

Regulation

• stabilize the economy through central bank mechanism

Fragmentation

• horizontal

• vertical

Complex financial networks

• regulation and deregulation

• dual banking structure

• new financial instruments and markets

• declining stability

• impact of deregulation - S&L crisis

Industrial Organization and Governance

Is American Industry concentrated?

• oligopoly - few sellers - capital intensive industries

• barriers to entry - economies of scale, product differentiation, product technologies, distribution networks

• waves of mergers produced concentration

• emergence of national market led to trade associations

• New Deal established government-supervised self-regulation that required cooperation of associations

• World War I and II increased power of economic associations

US not concentrated

• compare with other economies

• global competition

• efficiency results in concentration

Government policies against concentration

• Sherman Anti-trust Act

• Clayton Act

Market failure and market coordination

• changing economy

• transaction costs encourage non-market coordination

• asset specificity

• information scarcity

Mechanisms to manage transaction costs - formal or informal

• market - little transaction cost over nonspecific goods

• trilateral governance - transaction cost reduced by relying on a third party to manage contract

• bilateral governance - transaction cost reduced through reciprocal investment

• unified governance - vertical integration to reduce transaction costs

Evidence of concentration

• market sharing

• parallel pricing

• interlocking directorates

• R&D consortia - Sematech

• Export consortia

• Trade associations

• cooperatives

• unions

Position of Labor

The organization of capital affects the organization of labor - Marx

• business unionism vs craft unionism

• collective bargaining - National Labor Relations Board

• effect of decline of mass production technologies

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