How Does Opportunistic Behavior Influence Firm Size?

Christian Cordes, Peter J. Richerson, Richard McElreath and Pontus Strimling

Papers on Economics and Evolution from Philipps University Marburg, Department of Geography

Abstract: This paper relates firm size and opportunism by showing that, given certain behavioral dispositions of humans, the size of a profit-maximizing firm can be determined by cognitive aspects underlying firm-internal cultural transmission processes. We argue that what firms do better than markets – besides economizing on transaction costs – is to establish a cooperative regime among its employees that keeps in check opportunism. A model depicts the outstanding role of the entrepreneur or business leader in firm-internal socialization processes and the evolution of corporate cultures. We show that high opportunism-related costs are a reason for keeping firms' size small.

Keywords: Theory of the Firm; Transaction Cost Economics; Cultural Evolution; Opportunism; Cooperation Length 21 pages (search for similar items in EconPapers)
JEL-codes: C61 D01 D21 D23 M14 (search for similar items in EconPapers)
Date: 2006-11
New Economics Papers: this item is included in nep-bec, nep-cbe, nep-ent and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:esi:evopap:2006-18

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