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The (dis-)embedded firm: Complex structure and dynamics in inter-firm relations. Adding institutionalization as a Veblenian dimension to the Coase-Williamson approach – An emerging triangular organizational space

Elsner, Wolfram and Schwardt, Henning (2015): The (dis-)embedded firm: Complex structure and dynamics in inter-firm relations. Adding institutionalization as a Veblenian dimension to the Coase-Williamson approach – An emerging triangular organizational space.

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Abstract

The increasing complexity of the environment of firms, of strategic interaction, and emergent informal institutional network cooperation, seems to outreach the traditional Coase-Williamson transaction-cost framework with its market-hierarchy dichotomy. We propose to take the complexity of nowadays’ firm ecologies more serious and integrate an institutional dimension to enhance the analysis of real-world organizational forms and the theory of the firm. This institutional dimension is conceptualized as an “OIE” (Veblenian) “institutional dichotomy” that ranges between “instrumental” cooperative networking and “ceremonial encapsulation” (lock-in). Thus, a more comprehensive two-dimensional, particularly triangular, organizational space is drafted, which can better map the numerous and diverse forms of production and innovation systems, including their emergence as spatial clusters and corporate networks. The additional dimension integrates institutionalized network cooperation as “instrumental problem-solving”, vs. power and status seeking (by both large hierarchies and fiercely rivalling market participants) as “ceremonial dominance”. In addition to ideal market and hierarchy, it provides the ideal solution of institutionalized network cooperation, learned in recurrent social-dilemma problems, as a third vanishing point and corner. The resulting Organizational Triangle is considered a heuristic for inter-firm organizational research. As a check of its usefulness, this device is applied to recent developments in the global corporate economy.

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