Knowledge, the Firm, and the Market
Knowledge, the Firm, and the Market
Adam Smith's notion of the ‘invisible hand’ is countered with Chandler's notion of a ‘visible hand’ that replaces market mechanisms in coordination and allocation of resources. Firms continued to grow through the internalization and centralization of their processes until developments in computing and communications offered opportunities for decentralization, cost cutting, and less administrative complexity. Soon after that, the application of IT allowed improved coordination and production. Firms continue to grow and shrink simultaneously. This chapter discusses the types of transactions a firm will make, trends in employment, patterns of ownership, and control in a knowledge economy.
Keywords: invisible hand, visible hand, allocation, market mechanisms, internalization, centralization, decentralization, IT, knowledge economy
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