Part 1 Theoretical foundations - Theories of the firm (3/4) - Agency theory of the firm Social enterprise SLIDESHOW 4

Question 1

What does agency theory of the firm analyse?

Answer 1

The conflicts that may arise between principals (owners or shareholders) and agents (managers) within a firm.
= Separation of ownership from control

Question 2

What are the 2 particular issues arising with incomplete contracts and uncertainty?

Answer 2

1\ Adverse selection
2\ Moral hazard
–> Insurance industry

Question 3

What is the adverse selection?

Answer 3

When a principal is unable to verify an agent’s claims

Question 4

What is moral hazard?

Answer 4

When the agent has the possibility to act opportunistically

–> Policy holders become less careful

Question 5

What is the resulting conclusion in regards with our issues?

Answer 5

A fixed wage contract may not be the best way of

Question 6

What is a solution to adverse selection and moral hazard?

Answer 6

A performance-related remuneration structure

Question 7

What are the 3 central themes associated with the strategic theory of the firm?

Answer 7

1\ Resource-based view of the firm
2\ Firm’s boundaries
3\ Bounded rationality

Question 8

Of what type are resources?

Answer 8

1\ Property-based

2\ Knowledge-based

Question 9

What does the term capability define?

Answer 9

The specific and unique outcomes when a set of resources are combined and coordinated in complex ways

Question 10

What are the boundaries of the firm?

Answer 10

The ownership of assets

Question 11

What does involve redefining the boundaries of the firm?

Answer 11

Vertical or horizontal integration, franchising, forming strategic alliances …

Question 12

When does the need for greater cooperation and coordination become more important?

Answer 12

As the degree of complementarity increases.

It can be done thanks to joint ventures, strategic alliances of cull scale integration

Question 13

What is the goal of strategic theory?

Answer 13

Develop and improve the capabilities of the firms to adapt to a changing market environment

Question 14

Give 2 definitions of the social enterprise.

Answer 14

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

Question 15

What is the 1st objective of cooperatives?

Answer 15

Responding to needs that had been inadequately met by public services

Question 16

What is the British usage definition for social enterprises?

Answer 16

1\ enterprises driven primarily by social objectives

2\ achieving sustainability through trading

Question 17

What is the European definition of social enterprises?

Answer 17

Social entrepreneurship dynamic exemplified by firms seeking to enhance the social impact of their productive activities

Question 18

What are the economic criteria of a SE?

Answer 18

1\ continuous activity
2\ high degree of autonomy
3\ significant level of economic risk
4\ minimum amount of paid work

Question 19

What are the social criteria of a SE?

Answer 19

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

Question 20

What are the 2 types of SE regarding profits?

Answer 20

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

Question 21

What does bound Cooperatives and NPO’s?

Answer 21

SE which is a new dynamic in the third sector, not a conceptual break