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Firm reorganizations deeply affect employees. Management can reorganize in different ways, focusing on costs or acknowledging the involvement of employees. The latter implies following a social contract that complements incomplete (formal) labor contracts. Little is known about how the way in which firms reorganize affects their subsequent performance. Should a firm reorganize more socially, keeping the concerns of employees in mind as evident from an existing social contract, or should it focus on control the future direction of the firm and the costs made? We show that reorganizing more socially does not increase firm performance ex post, but taking more time when reorganizing does. Keywords: Downsizing, reorganization, firm performance, employee social contract JEL Classification Codes: D22, L21, M51, Firms appear to be continuously reorganizing. While reorganizing was originally thought of as a last resort for struggling firms, nowadays reorganizing seems to represent good management practice (Chadwick, Hunter and [...]

Taking the idea that institutional reproduction is not obvious and that institutions are vulnerable has significant conceptual implications. Institutional vulnerability can arise through communication between actors in a common language. To apprehend this requires an elaboration of John Searle's (1995, 2005) argument that language is the fundamental institution. Ontologically, language delineates and circumscribes a community. A community cannot function without a common language, and language at the same time constitutes a community's boundaries, allowing for focused and effective communication within a community. Communication through language introduces ambiguity as well, however, and so institutional reproduction, mediated by language, is a deeply contentious process. Communication across boundaries may particularly 'irritate' a system, as Niklas Luhmann has argued. How can institutions then be re-identified through change? Searle's general form for institutions is in need of elaboration. We develop arguments by drawing upon Luhmann's (1995) systems analysis and notion of communication. Keywords: communication, institutions, language, reproduction, vulnerability JEL Classification Codes: A13, B40, B52, Z00, Boundaries are an evolutionary achievement par excellence.--Luhmann (1995) Institutionalist analysis has emphasized the durability and reproductive qualities of institutions in a system with differential levels and rates of evolutionary change. [...]

Economists tend to see the market as a default option for social order and a role for government only when markets fail. Developing a convincing analysis of the role of government in economic processes, however, needs to start by considering government failure in its own terms. Drawing on insights from institutional economics, law and economics and the philosophy of law, emphasizing the necessity of rules for the economy, this paper develops the concept of government failure. The paper identifies and develops four different types of government failure. Government can set rules for economic processes and actors that are (1) too specific, (2) too broad, (3) that are arbitrary, or (4) that conflict with other rules it has set out to address other, related issues (possibly primarily noneconomic). Government failure is illustrated in the context of Intellectual Property Right (IPR) law as it relates to Anti-Trust law. Keywords: anti-trust law, government, government failure, intellectual property rights, rules in the economy JEL Classification Codes: K0, H10, P16, 1. We regard the state as an agency whose positive assistance is one of the indispensible conditions of human progress. (1) The way in which economists have looked at the [...]

From an institutionalist perspective, we identify five sources of policy conflict. Each may explain why policies intended to obtain particular goals for an institutionalized practice may have unintended consequences. We illustrate by analyzing attempts at introducing market-oriented reform in health care provision. Keywords: health care, market-oriented reform, policy, policy conflict. JEL Classification Codes: I28, I38, I11, H40, Despite what is assumed in much of the economic literature, an exception being institutional economics, policies are not fully plastic and cannot be sufficiently tailored such that they regulate a [...]

This study makes a number of observations about the way in which the current crisis in particular, but economic crises more generally, are reported upon by the media. Considering terminology used to describe the financial crisis of 2007/2008 by employing a dataset of 956 articles from The Economist, we study what terms are used, why, and how they evolve. We consider how the frequency of negative emotional terms and the frequency of negative economic terms increase from the period of no-crisis to the period of the crisis. Increasing incidence lowers levels of consumer confidence. We predict that as the crisis evolves the nature of the terminology used to describe it will change, and that the present crisis will receive a special name, like the 'Great Depression' of the 1930s. We explore a number of possibilities, and conclude that the preferred name will be the 'Credit Crunch.' Keywords: content analysis, business and economic cycles, recession, depression JEL Classification Codes: A1, E6, G00, Z00, How was the crisis of 2007/2008 reported in the media, and how is it likely to be referred to in the future? What terms are used, why, and how has [...]

Research on institutional change has flourished ever since the debate on agency and structure has moved away from the previously uncompromising positions in which either agency or structure was emphasized. A conceptual compromise is sought here in a focus on the processes of institutionalization, which allows one to move beyond the idea that institutions are mere mental constructs or the point of view that behavior is the mere reproduction of institutional patterns. Contributing to an understanding of the processes of institutional change, this paper analyzes institutional change as instigated by tensions, triggered by agents' discrepancies between concrete institutional settings and the socio-economic values these are to represent. The Social Value Nexus that is presented introduces an emphasis on the perceived legitimacy of institutions. Describing (types of) tensions between socio-cultural values and institutional settings, the paper explores how structure, agency and values interact in processes of institutional change. Keywords: institutional change, socio-cultural values, structure and agency, legitimation. JEL Classification Codes: D79, D02, Z10, B52, A13, The idea that institutions matter, nowadays, is commonplace. This should not be taken to imply that widespread agreement exists among the social sciences or even within disciplines about the nature [...]

New Institutional Economics (NIE) claims that Silent Trade exists. Indeed, it would constitute the first step 'as trade moves beyond the border of the village' (North). In this brief article we show both that Silent Trade--trade between parties who have only the most minimal of a shared flame of reference, without direct contact--has not existed and that NIE cannot account for the representational re-description and change in governance structure that it would entail. At least on the issue of language and learning, NIE is categorically different from Original Institutional Economics (OIE). Keywords: Institutional economics, silent trade, language, gift exchange, economic methodology JEL Classification Codes: B25, B41, D83, N00, F19, The Carthaginians say also this that there is a place in Libya, and People living in it, beyond the Pillars of Heracles. When they, the Carthaginians, come there and disembark [...]

'Bankruptcy is perhaps the greatest and most humiliating calamity which can befall an innocent man' --Adam Smith From an evolutionary perspective, bankruptcies may be seen as an important selection mechanism. [...]

Since it is rooted in a contradiction, there can be no such thing as an ideally beneficial patent system, and it is bound to produce negative results in particular instances. [...]

The relationship between market and society is a hotly debated issue in the social sciences. At the level of theory, this discourse dates back to considerations of social order in [...]

[B]oundaries of the mind and habit are harder to take down [than boundaries between states]. --The Economist The World Bank is prime among the organizations formulating and implementing economic policy [...]

Even though Adam Smith claimed that 'consumption is the sole end of production,' economists have not given it much attention. Institutional economics has done better than the average strand of [...]

Impurity and Social Order Geoffrey Hodgson [1995] has proposed that capitalist economies can be distinguished by how the 'impurity principle' works and by the extent to which a capitalist economic [...]