Participation and the Nature of the Firm



This paper contains observations on workers’ participation from the viewpoint of some economic theories of the nature of the firm and, in particular, of the nature of the employment relationship. Economic theorising on the firm has concentrated on the market behaviour of firms, i.e., on the content of a certain class of decisions rather than on how, or by whom, decisions are made; even the theory of the cooperative firm, developed by Ward, Vanek and others, is a theory of the market behaviour of such enterprises. The problem of the internal viability of a co-operative (or, more generally, a participatory) enterprise does not seem to have attracted very much attention from economists; but when it is recalled that the theory of the firm (co-operative as well as profit-maximising) presupposes that the firm is efficiently organised, the importance of the internal viability of the firm is obvious whilst the claims made on behalf of participation have tended to emphasise changes that follow internal reorganisation; however, organisational factors have been neglected in modern economics (compared with Marshall, say, one of whose ‘four agents of production’ was organisation!) in favour of market analysis. Recently however organisational factors have come to be emphasised in the treatment of ‘managerial slack’ and ‘X-efficiency’, and of course in the theories of the employment relationship to be considered later.


Moral Hazard Welfare Economic Collective Bargaining Employment Relation Employment Relationship 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Alchian, A., and Demsetz, H. [ 1972 ], ‘Production, Information Costs and Economic Organization’, American Economic Review, vol. 62 no. 1, pp. 777–95.Google Scholar
  2. Bendix, R., [ 1956 ], Work and Authority in Industry ( New York: John Wiley).Google Scholar
  3. Buchanan, J. M., and Tullock, G. [ 1962 ], The Calculus of Consent ( Ann Arbor: University of Michigan).Google Scholar
  4. Coase, R. H. [ 1953 ], ‘The Nature of the Firm’ reprinted in AEA Readings in Price Theory (Allen & Unwin).Google Scholar
  5. Cole, G. D. H. [1972], Self-Government in Industry (Hutchinson).Google Scholar
  6. Cole, G. D. H. [1973], Workshop Organization (Hutchinson).Google Scholar
  7. Flanders, A. [1969], ‘Collective Bargaining: a theoretical analysis’,reprinted in A. Flanders (ed.), Collective Bargaining. Selected Read-ings (Penguin).Google Scholar
  8. Galbraith, J. K. [1975], Economics and the Public Purpose (Penguin).Google Scholar
  9. Hirschman, A. O. [1970], Exit, Voice and Loyalty (Harvard University Press).Google Scholar
  10. Knight, F. H. [ 1965 ], Risk, Uncertainty and Profit ( New York: Harper & Row).Google Scholar
  11. Marglin, S. A. [ 1975 ], ‘What do Bosses do? Postscript’, (Harvard Institute of Economic Research, discussion paper).Google Scholar
  12. Marshall, A. [1920], Principles of Economics (Macmillan).Google Scholar
  13. Mill, J. S. [1910], Utilitarianism, Liberty and Representative Government (Everyman edition).Google Scholar
  14. Mill, J. S. [1970], Principles of Political Economy (Penguin).Google Scholar
  15. Pateman, C. [1970], Participation and Democratic Theory (Cambridge University Press).CrossRefGoogle Scholar
  16. Rowley, C. K., and Peacock, A. T. [ 1975 ], Welfare Economics ( London: Mart in Robertson).Google Scholar
  17. Simon, H. A. [ 1957 ], ‘A Formal Theory of the Employment Relation’,reprinted in H. A. Simon, Models of Man ( New York: John Wiley).Google Scholar
  18. Smith, A. [1904], The Wealth of Nations vol. II (Methuen).Google Scholar
  19. Stiglitz, J. E. [ 1975 ], ‘Incentives, Risk and Information: notes towards a theory of hierarchy’, Bell Journal of Economics (autumn 1975)pp. 552–79.Google Scholar
  20. Stone, K. [ 1973 ], ‘The Origins of Job Structures within the Steel Industry’, Review of Radical Political Economics, VI, pp. 113–73.Google Scholar
  21. Vanek, J. [1970], The General Theory of the Labour-Managed Economy(Ithaca: Cornell University Press).Google Scholar
  22. Ward, B. [ 1958 ], ‘The Firm in Illyria’, American Economic Review (Chapter 1 above).Google Scholar
  23. Williams, B. [ 1973 ], ‘A critique of utilitarianism’, Utilitarianism, for J. J. C. Smart and Bernard Williams and against Cambridge (Cambridge University Press).Google Scholar
  24. Williamson, O. E., Wachter, M. L., and Harris, J. E. [ 1975 ], ‘Under-standing the employment relation: the analysis of idiosyncratic exchange’, Bell Journal of Economics (spring) pp. 250–80.Google Scholar
  25. Wilson, D. F. [1972], Dockers (Fontana).Google Scholar

Copyright information

© Palgrave Macmillan, a division of Macmillan Publishers Limited 1977

Authors and Affiliations

There are no affiliations available

Personalised recommendations