Co-ordination and Spontaneity in Non-Hierarchical Business Organizations
New Thinking in Political Economy series
Series editor's foreword
Series editor’s foreword Ivan Pongracic’s Employees and Entrepreneurship breaks new ground in the study of the organization of economic activities within the business ﬁrm from the perspective of the Austrian School of Economics. He emphasizes the role of spontaneous order within ﬁrms. Successful ﬁrms, he argues, use the decentralized decision-making structure to foster creative responses among employees. He argues decentralized ﬁrms are decentralized precisely for this reason: they give decision-making power to employees in order to extract creative action from them. This emphasis on cultivating creativity among employees inside the ﬁrm, rather than disciplining them by aligning incentives, is a unique contribution of Pongracic. He marshals this analytical framework to interpret the modern evolution of business practice over the last quarter-century, which has seen both delayering of ﬁrm structure and an emphasis on creative work in ﬁrms such as Google. Since the mid-1980s several works in the Austrian tradition have addressed the theory of the ﬁrm. These studies tend to emphasize the importance of decentralized knowledge and the alignment of incentives within the ﬁrm to mobilize dispersed knowledge. A classic work in this tradition is Frederic Sautet’s An Entrepreneurial Theory of the Firm, with its emphasis on the M-form organization and the Hayekian knowledge problem that business enterprises must confront and solve for the successful co-ordination of economic plans within the ﬁrm. Pongracic’s work ﬁts nicely into this modern literature. However, Pongracic’s work is the ﬁrst work in this literature to address in depth the radical decentralization and ﬂattening of...