A substantive conception of work and of the firm – institutional implications

Abstract

The aims of the paper are to scrutinize the standard economic theory of work and the agency theory of the firm and propose alternative conceptions. By jointly analyzing theories of work and of the firm, maintained separate in the economics literature, we hope to enhance our explanatory and normative power. Firstly, we propose a substantive conception of work defined as a collective endeavor in which interpersonal interactions generate sympathy and explain the emergence of norms of cooperation. Secondly, we propose a substantive conception of the firm based on authority. Drawing on McMahon, we define authority as a collective and normative device whose justification is to facilitate mutually beneficial cooperation among people with divergent aims. We then show that agency theory, which normatively influenced the shareholder governance model, denies that authority is a core attribute of firms. By contrast, an authority-based theory of the firm normatively requires that firms are governed by reflexive authority, a kind of workplace democracy in which the authoritative directives that guide workers’ behavior are collectively determined. We end by showing that authority – but not power - is absent from digital platforms work.