Book contents
- Frontmatter
- Contents
- Preface and Acknowledgments
- Introduction
- PART I THE THEORY OF THE FIRM
- PART II THE ENTREPRENEUR IN EQUILIBRIUM
- PART III HUMAN CAPITAL, FINANCIAL CAPITAL, AND THE ORGANIZATION OF THE FIRM
- 6 Human Capital and the Organization of the Firm
- 7 Financial Capital and the Organization of the Firm
- PART IV INTERMEDIATION BY THE FIRM
- PART V MARKET MAKING BY THE FIRM
- 12 Conclusion
- References
- Author Index
- Subject Index
6 - Human Capital and the Organization of the Firm
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- Preface and Acknowledgments
- Introduction
- PART I THE THEORY OF THE FIRM
- PART II THE ENTREPRENEUR IN EQUILIBRIUM
- PART III HUMAN CAPITAL, FINANCIAL CAPITAL, AND THE ORGANIZATION OF THE FIRM
- 6 Human Capital and the Organization of the Firm
- 7 Financial Capital and the Organization of the Firm
- PART IV INTERMEDIATION BY THE FIRM
- PART V MARKET MAKING BY THE FIRM
- 12 Conclusion
- References
- Author Index
- Subject Index
Summary
Why are firms needed to manage the services of human capital? After all, it is individual workers who provide their abilities, knowledge, information, ideas, designs, productive effort, monitoring, supervision, and decision making. Consumers do not require a firm to coordinate their efforts because they can organize themselves into productive teams. Yet most production and distribution take place within organizations established by firms. To determine why this is so, this chapter examines the economic role of the firm in the management of human capital.
Instead of establishing firms, consumer-workers can combine their human capital to produce output through worker cooperatives. These basic labor partnerships feature equal sharing of surplus and democratic control over production and hiring decisions. The worker cooperative maximizes net benefit per member, as do clubs and other types of partnerships. The worker cooperative is an organization that consists of its members. The worker cooperative provides an alternative to the formation of firms.
The basic worker cooperative is a type of partnership that shares profits equally among its members and maximizes returns per member. Such equal sharing may not be the optimal contract among members. In practice, the partnership may perform more complex functions such as sharing joint costs and building reputations. However, the basic worker cooperative as described here has been widely studied. The basic partnership serves as a useful benchmark for understanding the economic role of the firm. This chapter examines the consequences of modifying the partnership with more sophisticated institutional features.
- Type
- Chapter
- Information
- The Theory of the FirmMicroeconomics with Endogenous Entrepreneurs, Firms, Markets, and Organizations, pp. 231 - 262Publisher: Cambridge University PressPrint publication year: 2009