Part 1 Theoretical foundations - Theories of the firm (3/4) - Agency theory of the firm Social enterprise SLIDESHOW 4 Flashcards
What does agency theory of the firm analyse?
The conflicts that may arise between principals (owners or shareholders) and agents (managers) within a firm.
= Separation of ownership from control
What are the 2 particular issues arising with incomplete contracts and uncertainty?
1\ Adverse selection
2\ Moral hazard
–> Insurance industry
What is the adverse selection?
When a principal is unable to verify an agent’s claims
What is moral hazard?
When the agent has the possibility to act opportunistically
–> Policy holders become less careful
What is the resulting conclusion in regards with our issues?
A fixed wage contract may not be the best way of
What is a solution to adverse selection and moral hazard?
A performance-related remuneration structure
What are the 3 central themes associated with the strategic theory of the firm?
1\ Resource-based view of the firm
2\ Firm’s boundaries
3\ Bounded rationality
Of what type are resources?
1\ Property-based
2\ Knowledge-based
What does the term capability define?
The specific and unique outcomes when a set of resources are combined and coordinated in complex ways
What are the boundaries of the firm?
The ownership of assets
What does involve redefining the boundaries of the firm?
Vertical or horizontal integration, franchising, forming strategic alliances …
When does the need for greater cooperation and coordination become more important?
As the degree of complementarity increases.
It can be done thanks to joint ventures, strategic alliances of cull scale integration
What is the goal of strategic theory?
Develop and improve the capabilities of the firms to adapt to a changing market environment
Give 2 definitions of the social enterprise.
1\ market-oriented economic activities serving a social goal
2\ innovative response to the funding problems of non-profit organizations
–> for profit also = philanthropy
–> non profit supporting commercial activity
What is the 1st objective of cooperatives?
Responding to needs that had been inadequately met by public services
What is the British usage definition for social enterprises?
1\ enterprises driven primarily by social objectives
2\ achieving sustainability through trading
What is the European definition of social enterprises?
Social entrepreneurship dynamic exemplified by firms seeking to enhance the social impact of their productive activities
What are the economic criteria of a SE?
1\ continuous activity
2\ high degree of autonomy
3\ significant level of economic risk
4\ minimum amount of paid work
What are the social criteria of a SE?
1\ explicit aim to benefit the community
2\ initiative launched by a group of citizens
3\ decision-making power not based on capital ownership
4\ participatory nature
5\ limited profit distribution
What are the 2 types of SE regarding profits?
1\ non profit school = no distribution
2\ social economy, goal = benefit either their members or a larger collectivity with democratic decision-making process and prevalence of people and labour over capital in the distribution of incomes
What does bound Cooperatives and NPO’s?
SE which is a new dynamic in the third sector, not a conceptual break
