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A Neo-Weberian Theory of the Firm

Pursey Heugens

University of Utrecht, The Netherlands, p.heugens{at}econ.uu.nl

The field of organization studies harbors two types of theory of the firm: ‘why’ and ‘how’ theories. The former seeks to explain why firms exist despite the availability of institutional alternatives, whereas the latter explores how firms meaningfully connect the actions of many interdependently operating individuals to collective outcomes. Since the two approaches are complements rather than substitutes, the field would benefit from the development of a parsimonious theory that integrates ‘why’ and ‘how’ perspectives. It is argued that Max Weber’s writings on bureaucracy, and especially his focus on the organization as a collective actor governed by rational-legal decision rules, provide a meaningful conceptual background structure for such a theory. Specifically, through a rational reconstruction of certain elements of the Weberian legacy, a neo-Weberian theory of the firm is constructed here that simultaneously provides reasons for the existence of the firm and explores the nature of cooperation within the firm itself.

Key Words: Max Weber • theory of the firm • bureaucracy theory • decision rules • cognitive transaction costs

Organization Studies, Vol. 26, No. 4, 547-567 (2005)
DOI: 10.1177/0170840605051471
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[Abstract] [PDF]