a1 Bocconi University, Milan, Italy
Integrating organization theory, organizational economics, and organizational law considerations, it is argued that the ‘nature of the firm’ can be more completely understood if it is considered a complete society-establishing contract, including constitutional pacts on procedures for the selection of actions, rather than a nexus of incomplete transactional contracts complemented by authority, power, or relational norms. The explanation is more general since firm-establishing contracts are a sub-set of those society-establishing contracts that are capable of regulating any venture in condition of high uncertainty and potential conflict, and because the constitutional regime adopted (authority-based, democratic, or other) becomes a specification of particular types of firms rather than part of the explanation of the firm. Evidence from published studies, as well as from newly gathered data on firm-founding contracts and other partnership establishing contracts (500 record database on large multi-party projects), document that actual contracts under uncertainty do fit the hypothesized pattern.
My deepest thanks should go, first and foremost, the JOIE Editor and anonimous reviewers for the exceptionally accurate and constructive review process, that contributed a lot to clarify the argument and to settle possible objections ex-ante.
The new data presented in the paper include analyses on the database of ‘Knowledge, Governance and Projects’ (KGP), a research partnership among the following universities and investigators: Crora Bocconi (Anna Grandori, principal investigator), CBS (Peter Maskell), Augsburg-Cologne (Mark Ebers), Bonn (Gernot Grabher), Strasbourg (Patrick Cohendet), Pescara (Andrea Prencipe); co-financed by MIUR (Italian Ministery of University and Research) and by the partner universities.
I am also grateful to the Palo Alto Angels’ Club for allowing my participant observation at their meetings in 2005. My former Phd students Marco Furlotti and Anna Gatti are thanked for research assistantship. Previous versions of this paper have been presented in invited seminars and conferences in various universities including MIT, DIME conference Lisbon, and the Univerity of Venice. Colleagues at these institutions, and participants in the seminars are warmly thanked for their comments, in particular Robert Gibbons and Massimo Warglien.