Competition, Monopoly and Corporate Governance

Competition, Monopoly and Corporate Governance

Essays in Honour of Keith Cowling

Edited by Michael Waterson

Competition, Monopoly and Corporate Governance covers three broad themes, each associated with a particular strand of Keith Cowling’s own writings in industrial economics and each represented by four specially commissioned papers.

Chapter 1: Coordination and Hierarchy in the Japanese Firm: The Strategic Decision-making Approach vs. Aoki

Dan Coffey and Philip R. Tomlinson

Subjects: economics and finance, competition policy, corporate governance, industrial economics


1. Coordination and hierarchy in the Japanese firm: the strategic decisionmaking approach vs. Aoki Dan Coffey and Philip R. Tomlinson 1. INTRODUCTION Throughout his academic career, Keith Cowling has been concerned with the increasing concentration of economic power and, in particular, its implications for the wider public interest. This is perhaps best illustrated in his 1982 book, Monopoly Capitalism, in which he extends Baran and Sweezy’s (1966) seminal contribution to argue that the increasing monopolisation of capitalist economies is likely to lead to greater economic instability and stagnation.1 This framework was developed subsequently to encompass the activities of the transnational corporation, in close collaboration with Roger Sugden (see Cowling and Sugden, 1987), an undertaking which sparked a critical reappraisal of the orthodox (Coasian) theory of the firm. In this and subsequent work Keith Cowling has emphasised the problem posed by the hierarchical nature of the modern corporation, where strategic decisions are taken in the boardrooms of large firms by corporate elites, able and willing to override the objections of other affected parties. Strategic decisions in this sense are those that affect the broad direction of the firm and hence the determination of a series of economic variables, such as the level and intended location of investment, employment, and output. When corporate elites take strategic decisions that conflict with the broader interests of a society, the social ‘optimum’ is necessarily breached. With no available market mechanism to redress the balance, the outcome is one of ‘strategic failure’...

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