| How Does Opportunistic Behavior Influence Firm Size? | |||||||
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| 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.. Theory of the Firm, Transaction Cost Economics, Cultural Evolution, Opportunism, Cooperation Length 21 pages | |||||||
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