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Predatory Value ExtractionHow the Looting of the Business Corporation Became the US Norm and How Sustainable Prosperity Can Be Restored$
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William Lazonick and Jang-Sup Shin

Print publication date: 2019

Print ISBN-13: 9780198846772

Published to Oxford Scholarship Online: January 2020

DOI: 10.1093/oso/9780198846772.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 14 August 2020

The Business Enterprise as a Value-Creating Organization

The Business Enterprise as a Value-Creating Organization

(p.14) 2 The Business Enterprise as a Value-Creating Organization
Predatory Value Extraction

William Lazonick

Jang-Sup Shin

Oxford University Press

This chapter presents a theoretical perspective—the Theory of Innovative Enterprise—that enables us to understand the evolving relation between value creation and value extraction. The Theory of Innovative Enterprise posits that business enterprises are central to the achievement of stable and equitable economic growth and offers an analytical framework for understanding the processes of value creation and value extraction as prime micro-level determinants of macroeconomic outcomes. Specifically, it analyzes the dynamic interaction of three social conditions of innovative enterprise—strategic control, organizational integration, and financial commitment—in determining both the value-creating capability of a business enterprise—its ability to generate higher-quality products at lower unit costs—and the distribution of value created by the enterprise among participants in the value-creation process. It provides a rigorous and relevant alternative to the prevailing market-based theories of the firm.

Keywords:   Theory of Innovative Enterprise, value creation, strategic control, organizational integration, financial commitment, social conditions of innovative enterprise

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