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A study to provide micro-foundations for the idea that a manager who brought a project into the firm controls that project is presented. Concentrated asset ownership, low-powered incentives, and centralized authority were described as typical characteristics of firms. The findings led to new perspectives on the firm as legal entity and on link between different views of the firm.

An examination of when a principal will use persuasion or authority to get compliance revealed that a principal will rely more on persuasion for projects with high need for implementation. It was also found that persuasion and authority are complements when authority is relatively ineffective, and substitutes if authority is very effective.

The behavior of rational agents in choosing an action to succeed based on overestimation rather than underestimation is studied. Such agents tend to attribute their failure to exogenous factors and success to their choice.

This article develops a theory in which a firm's adoption of a prosocial purpose can increase profitability by strengthening employees' reputation and identity-leading to higher effort and lower wages-as long as implementing purpose is costly with respect to direct monetary payoffs. Employees who value prosocial action will select into firms with a social purpose, which then become a visible carrier for these employees' identity and reputation. [ABSTRACT FROM AUTHOR]