This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the ‘separation and control’ issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem.

: This paper presents the Riskit method for software engineering risk management. This document contains the motivation for the method, description of the Riskit analysis graph and a detailed description of the Riskit process. 2 Table of Contents 1.

Foresight activities have often provided support for objectives such as priority-setting, networking and consensual vision-building. In this paper, we draw upon complementary evolutionary perspectives and discuss these objectives from the viewpoint of diversity which may be vital in contexts characterized by technological discontinuities and high uncertainties. We also argue that although the scanning of weak signals has been widely advocated in such contexts, the solicitation of ideas for prospective innovations may provide more focused, action-oriented, and comparable reflections of future developments. For the analysis of such ideas, we develop a collaborative foresight method RPM Screening which consists of phases for the generation, revision, multi-criteria evaluation, and portfolio analysis of innovation ideas. We also report experiences from a pilot project where this method was employed to enhance the work of the Foresight Forum of the Ministry of Trade and Industry in Finland. Encouraging results from this project and other recent applications suggest that RPM Screening can be helpful in foresight processes and the development of shared research agendas.

Economics is the science of want and scarcity. We show that want and scarcity, operating within a simple exchange institution (double auction), are sufficient for an economy consisting of multiple inter-related markets to attain competitive equilibrium (CE). We generalize Gode and Sunder's (1993a, 1993b) single-market finding to multi-market economies, and explore the the role of the scarcity constraint in convergence of economies to CE. When the scarcity constraint is relaxed by allowing arbitrageurs in multiple markets to enter speculative trades, prices still converge to CE, but allocative efficiency of the economy drops. Optimization by individual agents, often used to derive competitive equilibria, are unnecessary for an actual economy to approximately attain such equilibria. From the failure of humans to optimize in complex tasks, one need not conclude that the equilibria derived from the competitive model are descriptively irrelevant. We show that even in complex economic systems, such equilibria can be attained under a range of surprisingly weak assumptions about agent behavior.

Herbert Simon was the apostle of bounded rationality. He very often illustrated bounded rationality in the context of the theory of the firm, and was, of course, a major contributor to organizational theory. However, in spite of Simon’s efforts, I argue that bounded rationality has been only incompletely absorbed in the economics of organization, is little used for substantive purposes, and mostly serves a rhetorical function, and that part of the reason for this is that Simon and those who have followed his lead have failed with respect to developing a distinct, affirmative program for incorporating bounded rationality in the economics of organization. In order to substantiate these claims, I discuss and compare alternative approaches to integrating bounded rationality with the theory of economic organization. I argue that in general bounded rationality is treated “thinly,” and is actually not necessary for producing the main insights of these theories. The paper ends with speculating on how to proceed with integrating richer notions of bounded rationality with the theory of economic organization.

leading up to this paper. In his book “Invention, ” Professor Norbert Wiener (1993), commenting on the relative importance accorded to individuals and institutions in historical narratives of science and inventions, asks us to imagine Shakespeare’s “Romeo and Juliet ” without either Romeo or the balcony. 2 The story is just not the same. He likens much of the study of the economic history of science and accounts of inventions as “all balcony and no Romeo. ” The balcony for Norbert Wiener captures the context in which the story unfolds – the culture, the institutions, the constraints and the catalysts that move the plot forward and thicken it. Romeos, for Wiener, play the leading parts in the story, because there is a strong fortuitous element to inventions and there is no inevitability that a possible discovery will be made at a given time and space. Take away either one, Romeo or the balcony, and the whole story falls apart. In a similar vein, we would liken studies of strategic management to “all balcony and no Romeo. ” But if we accuse strategic management of being “all balcony and no Romeo, ” strategic management scholars could legitimately accuse entrepreneurship of being “all Romeo and no balcony.” In this chapter we wish to suggest a point of view from entrepreneurship that will allow

Prior efforts in personalization have focused primarily on modeling individual consumer’s preferences so that products for which they have a higher likelihood of purchasing are presented. In this study we explore the potential of an approach to personalization focusing on customizing shopping tools based on a consumer’s Product Category Knowledge. The low Product Category Knowledge user may not be able to use the shopping tools as well as the high Product Category Knowledge user, because lower Product Category Knowledge users allocate cognitive power to learning the product attribute space at the expense of using the tool effectively. Alternatively, shopping tools may effectively guide the decision making of low Product

Investigations of the degree to which people neglect or use base rates typically require subjects to make a judgment based on presumptive integrations of base rates and likelihood ratios. The present paper deals with a logically prior issue, whether people understand what data are needed to constitute a proper base rate. The method, which we will call the Partial Information Paradigm, has subjects select data relevant to, for example, diagnosis of a disease, D, based on a symptom, S. The question is whether subjects select those frequencies of cases for which information about the presence or absence of D is available, but for which information about the presence or absence of S is not. Only the former frequencies are relevant to the estimation of the base rate of D, hence to the probability of D given S. Six experiments are reported. Four experiments ask subjects to select those frequencies relevant to diagnosis, one of which also had subjects select frequencies relevant to prediction...

This paper is intended to provide a selective yet fairly comprehensive assessment of how several authors associated with the new institutional economics (NIE hereafter) have dealt with some issues pertaining to the theory of economic behaviour under uncertainty. Among the issues selected are: (1) the concept of uncertainty; (2) the influence of institutions on economic behaviour; and (3) the concept of rationality. The paper attempts to contribute to classifying different views on these issues and, thus, to organizing the debate about them. Some recent and significant developments in this debate are considered. In addition to their interest for the theory of economic behaviour per se, all these issues are important for understanding how NIE relates to neoclassical economics, as well as to other alternatives to the latter

In a series of methodologically oriented papers, Herbert Simon (e.g., 1976, 1978, 1979) tried to convince economists to take seriously his Grand Theme of bounded rationality (henceforth, “BR”). His examples of bounded rationality and its implications quite often involved the business firm. Indeed, he sometimes took the