Contributions published at Foundations of Business Administration and Theories of the Firm (Andreas Scherer)

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In this paper, we aim to contribute to Ahrne and Brunsson’s notion of “partial organization” (2011). By definition, partial organizations lack one or more of the typical features of “complete organizations”, i.e., hierarchies, membership, rules, or monitoring and sanction mechanisms. We reconstruct phenomena of partial organizations from a theoretical perspective called “communication constitutes organizations” (CCO). The CCO view allows for examining partial organizations as dynamic phenomena that typically undergo a discursive trajectory over time. Based on the empirical example of the Equator Principles (EP) standard in international project finance, we show that partial orga¬ni¬za¬tions can face pressures of eventually developing into a more “complete” organization, that is, by adding further organizational elements (e.g., hierarchies, membership, etc.). This identified pro¬cess pattern may also hold true for other phenomena of partial organizations in the global realm.

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In this article I analyze the role of communication for organizational efficiency and organizational legitimacy. The main point is that under conditions of environmental complexity and dynamics characteristic for economic activity in a globalized economic system, business firms need to extensively engage in communicative processes with their stakeholders to obtain information necessary for organizational survival. In general, such processes are also suitable to generate organizational legitimacy, which is becoming increasingly central to the successful management of business firms. By introducing the concept of multifunctional communication, opportunities and limits of the simultaneous generation of organizational efficiency and organizational legitimacy by means of stakeholder communication are discussed.

This article argues that in the capitalist system of market economy, businesses contribute to the stabilization of society by way of activities that go beyond their economic engagement in markets. The analysis of the relationship between corporate nonmarket activities – corporate social engagement as well as political activities such as lobbying – and the modern welfare state suggests that both types of nonmarket activities can be conceived as intra-organizational realizations of the contradictory societal principles of economic liberalism and social protectionism. The combination of these varieties of corporate nonmarket activities and their underlying logics (instrumental logic in the case of political activities and prosocial logic in the case of social engagement) within a single framework contributes to the understanding of the dynamics and functions of the multiplicity of corporate activities by going beyond focusing on purely economic explanations. In addition, we emphasize the dangers of an instrumental approach to corporate social engagement.

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During the current international financial crisis, the effectiveness of existing corporate governance institutions has been questioned both in the scientific community and in the media. A special focus of this discussion is on the containment of opportunistic behavior. In the corporate governance literature, the dominant approaches axiomatically assume individuals with self-interest or opportunistic behavior. The modern research stream of psychological economics, however, has shown that prosocial preferences exist and do matter. When the determinants of prosocial behavior are considered, the implications for the design of corporate governance institutions may clash with conventional wisdom. We suggest that the following measures help to overcome social dilemmas at the firm level: board representation of knowledge workers who invest in firm-specific human capital, attenuation of variable pay-for-performance, selection of directors and managers with prosocial preferences, and employee participation in decision-making and control. With our approach, we make a rare attempt to apply psychological economics to a complex institution, namely corporate governance.