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Corporate Governance and Firm OrganizationMicrofoundations and Structural Forms$
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Anna Grandori

Print publication date: 2004

Print ISBN-13: 9780199269761

Published to Oxford Scholarship Online: September 2007

DOI: 10.1093/acprof:oso/9780199269761.001.0001

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The Benefit of Doubt: Shadow Norms and Governance in Trust-based Organizations

The Benefit of Doubt: Shadow Norms and Governance in Trust-based Organizations

(p.232) 10 The Benefit of Doubt: Shadow Norms and Governance in Trust-based Organizations
Corporate Governance and Firm Organization

Joseph Lampel

Oxford University Press

This chapter enquires into the cognitive foundations of governance and points out that common features of modern economic activities, such as uncertainty and knowledge intensity, undermine the efficiency of hierarchical and contractual governance mechanisms. These call for ‘soft’ governance means, such as implicit agreements and social norms. On the other hand, this chapter acknowledges the pitfalls of these means in the face of unforeseen contingencies and required flexibility. Hence, it engages in a detailed analysis of the mechanisms of social control which yields a distinction between types of norms. This shows how ‘shadow norms’ (procedural heuristics helping in making sense of what behaviours can be considered violations of norms) and ‘meta-norms’ (procedural norms about what behaviours should be followed in the face of norm violation) possess relatively flexible coordination mechanisms, helping bystanders to exert effective social control.

Keywords:   social control, norms, trust, flexibility, conventions, implicit agreements

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