The Theory of the Innovative Organization

Sun, 16 Mar 2025 21:52:32 +0000

An excerpt from William Lazonick’s terrific work “Business Organization and the Myth of the Market Economy”, a book that offers a critique of what a ‘market economy’ is purported to be, through an evaluation of the strategies and economic histories of businesses within what can be called “actually existing capitalism”.

Here, at the risk of a small amount of repetition, I shall supplement that discussion by focusing on the nature of fixed costs, the different sources of uncertainty the innovative organization faces, and the relation between organizational capability and technological change. Through its investment activities, a business organization commits financial resources to specific processes to make particular products with the expectation of reaping financial returns. Once they are committed, the productive assets of the organization represent fixed costs that must then be recouped by the production and sale of output. If, through the sale of sufficient output, investments could generate expected financial returns instantaneously, fixed costs would not represent an economic problem to the organization. But then, we would probably not call the “assets” underlying these costs “investments.” Indeed, we might not even deem it appropriate to call these costs “fixed” or the entity that incurs them a firm. The problem of fixed costs occurs because the production and sale of the enterprise’s output occur neither instantaneously nor with certainty. The basic economic problem that confronts the capitalist enterprise is to transform fixed costs into revenue-generating products to realize financial returns. An analysis of how and with what success the business organization manages this transformation is the key to understanding technological change, value creation, and economic growth.

Notes on 'What is History'

Sun, 16 Jun 2024 05:12:05 +0000

“That elusive entity ‘human nature’ has varied so much from country to country and from century to century that it is difficult not to regard it as a historical phenomenon shaped by prevailing social conditions and conventions. There are many differences between, say, Americans, Russians, and Indians. But some, and perhaps the most important, of these differences take the form of different attitudes to social relations between individuals, or, in other words, to the way in which society should be constituted, so that the study of differences between American, Russian, and Indian society as a whole may well turn out to be the best way of studying differences between individual Americans, Russians, and Indians. Civilized man, like primitive man, is moulded by society just as effectively as society is moulded by him. You can no more have the egg without the hen than you can have the hen without the egg.”

History on Class Letters

The Theory of the Innovative Organization

Notes on 'What is History'