Riassunto esame Business of the firm

Cooperative interaction among acquired subsidiaries and merged parts

How do different policies and activities of an organization fit together? = Problem of "fit" 7I representation: mapping and matrix enhanced effects to] relations among environmental features and choice variables.

Complementarity among choice variables = generate different models strategy and structure need to fit: I. I, doing more of one of them increases the returns of doing more of the other (work well together = synergy) (from technological and behavioural reasons) (= substitution: doing more of one of them decreases the returns of doing more of the other) (example) evolution of production.

Design problem: identify and select among well fitting → strategies + organisational design + environment: need to fit.

Complements get active together but decrease the ← probability that you implement something that is substitute.

Things that must be together generate different ways and solution and models.

Implications arising from complementary and substitution.

Non-convexity and non-concavity

1. Non-convexity and non-concavity] L. Concavity: given two choices.

Convexity: given two II with same performance, any options available any choice between the two leads intermediate one is to higher performance also available (in between there's a maximum) relates to alternatives relates to performance implications:.

I picks are locally stable: no small changes, only radical ones improve performance (many and in the real market they do not exist simultaneously).

Non convexity (indivisibilities) Non concavity: multiple picks, deviation can lock-in in suboptimal stable states some things cannot be divided give bad outputs (dependence) (ex. either in or out) (ex. performance, efficiency, experience) being too good: inhibits improvement.

Economies of scale complementarity learning trap (QWERTY).

Feedback and market effects

-1 Feedback: do something - receive something back: old industrial economy = economies of scale = supply side (automotive) not only "orient action or trigger reaction new informational economy = economies of networks = demand side (social networks).

Negative: deviation reduced (get things under control).

ii. Value depends on number of Tippy market: once you take an important Positive: deviation gets amplified (stability after a while) people already connected to it-I part, take it all (= single winner market) (fewer limits - no diseconomies) based on the demand side (not just supply) effects. gets larger and larger.

Tippyness: how much utility depends on network externalities (positive externality) I externalities; depends on the balance ÷ indirect one market participant affects others bandwagons: consumer’s between two fundamental forces: expectations: drives success without compensation being directly paid economies of scale and variety.

Central problems in the firm: coordination and motivation

Central problems in the Firm: coordination and motivation.

1- in powerful be should. solve to order not strong enough and motivational] (fails to solve) coordinations problems.

Why should motivation and coordination be problems carried others than by markets?

• 1. Negative externalities
• Function: allocating and use of resources among players it fails to represent.
• 2. Informational asymmetries (not efficient enough) - firm are an efficient alternative.
• 3. Contractual incompleteness - model) agent&(principal L firms can substitute markets whenever they fail: In some context observing the market is better, in other the firm is better.

I matter of: transaction costs & ownership and power.

Firm controls access to resources (firms work related to owner, when you have to enter the market (ex. coordination, establishing [ who controls resources) - ownership: specify the rules of the specifications and prices, negotiating, monitoring-enforcing agreement) game (hierarchical arrangement = more efficient).

Remedies: vertical integration, substituting market with authority, monitoring (break information asymmetries).

Whenever markets are costly and it is more efficient to have someone that determines the rules of the game or access to resources, then firms will substitute markets.

Motivation and incentives

Motivation arising from contrasting interests I. T.si'' problem of incentives (re-align) (worker = organisation) * have problems too.

Sources: little effort and overactivity limited observability of actions and moral hazard, problem of un-observability: is difficult to capture the actual effort (noise in performance) principal-agent model (deal with information asymmetries).

There are three attitudes towards risk: agent uses the machines on behalf of the principal who owns them decides the “effort level” ←.

• 1. Averse: prefers certainty to risk payment) same income, (lower risks principal: payment Fixed-uncertain payment less attractive than fixed rate payment.
• More agent, to transferred risk more the: pay Variable against outcome variability.