Firms, Incomplete Contracts and Organizational Learning

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    Abstract

    This explorative paper argues that the central problem of economic organization is adaptation to unforeseen contingencies. However, flexibility is a rather neglected issue in the theory of economic organization. This contrasts with much organization theory, in which the seeking and processing of information about the organization's key uncertainties is seen as a determinant of organizational form. The notion of incomplete contracts is argued to
    provide a means to bridging ideas from organizational economics and organization theory, particularly organizational learning. Incomplete contracts are not only important because they provide room for incentive problems, but more importantly because they allow firms to exploit processes of organizational learning that must always involve some unforeseen contingencies. Firms are seen as efficient institutional responses to learning processes that
    involve strongly complementary problem-solving activities.
    Original languageEnglish
    Place of PublicationFrederiksberg
    PublisherDRUID - Danish Research Unit for Industrial Dynamics
    Number of pages21
    ISBN (Print)8778730015
    Publication statusPublished - 1996
    SeriesDRUID Working Paper
    Number96-02

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