Handbook on the Economics and Theory of the Firm
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Handbook on the Economics and Theory of the Firm

Edited by Michael Dietrich and Jackie Krafft

This unique Handbook explores both the economics of the firm and the theory of the firm, two areas which are traditionally treated separately in the literature. On the one hand, the former refers to the structure, organization and boundaries of the firm, while the latter is devoted to the analysis of behaviours and strategies in particular market contexts. The novel concept underpinning this authoritative volume is that these two areas closely interact, and that a framework must be articulated in order to illustrate how linkages can be created.
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Chapter 12: Hybrid Governance

Albert Jolink and Eva Niesten


Albert Jolink and Eva Niesten 12.1 INTRODUCTION As with all phenomena in real life, variety abounds in the real world of governance structures. The abstractions of hierarchies and markets, which have populated the binary universe of scholars of organizations, only faintly relate to their real-life counterparts. In many cases, the governance structures that have served the variety of transaction composites were neither market nor hierarchy, and often represented a category of their own. In the economics of organization, this third category has been denoted as a hybrid governance structure, stressing both the difference with either market or hierarchy, as well as resembling both, at least partially, at the same time. Over the last 40 years, the studies of hybrids have served to identify and categorize the characteristics of this governance structure, but have only gradually come to grips with the complexities involved. At least two theoretical perspectives within the economics of organization have studied hybrid governance structures. These are the capabilities perspective and transaction cost economics. Richardson (1972) was one of the first advocates of a capabilities perspective on inter-firm cooperation. He claimed that when we look at reality only in terms of the sharp dichotomy of firms and markets, we obtain a distorted view of how the industrial system works. The complex networks of cooperation between firms exist, because of the need to coordinate closely complementary but dissimilar activities and capabilities (ibid.). This capabilities perspective is much more conscious of the production side of the firm than is transaction...

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