Organizational Economics Theory Of An Organization Essay

996 Words Apr 11th, 2016 4 Pages
Organizational Economics Theory

The Organizational Economics Theory originated during the second half of the 20th century utilizing concepts and tools from the field of economics to study the internal processes and structure of a firm. There was an article by Ronald H. Coase in 1937, “The Nature of the Firm,” which raised questions, interest and concerns as to the economic factor of an organization. It also established that economics could not stand on price theory alone it did not explain the behavior in and of a firm (Shafritz, Ott, & Jang, 2011). It posed questions as to the size, scope, structure of the organizations. This theory also introduced other theories such as agency theory, behavioral theory, incomplete contact theory, transaction costs economics, and game theory (Shafritz, Ott, & Jang, 2011). As the years progressed interests and concerns of organizational economics expanded in to answer key questions such as contractual nature of firms, bounded rationality, the significance of investments in specific assets, the deference’s between rights and residual rights, and the effect of imperfect information (Shafritz, Jang, & Ott, 2011). The results of organizational economics is it’s useful in developing a firm 's human resource management policies, determining how a firm should be organized, assessing business risk, implementing rewards systems and making, and analyzing and improving management decisions. Michael C. Jensen & William H. Meckling Theory of the…

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