Thursday, March 4, 2010
Price, Politics and Path Dependence
The last post --"What is a firm?" -- also reminds me how business strategy researchers can actually contribute in our understanding of the institution of firms, particularly their internal organizations and various sources of persistently heterogeneous performance levels. Robert Gibbons and Rebecca Henderson, among many others, who are pushing this front forward over these years, have written some excellent reviews on the literature of internal organization recently (see here and here), with particular emphasis on the role of path dependence within a firm. Bringing their earlier work on relational contracting, they show how this and many other sources of path dependence could actually explain the existence of persistent performance difference in seemingly similar enterprises, which is arguably the central question in strategic management.