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2011/2012  KAN-FSM_FS57  Theory of the Firm

English Title
Theory of the Firm

Course Information

Language English
Point 7,5 ECTS (225 SAT)
Type Mandatory
Level Full Degree Master
Duration One Semester
Course Period Autumn
Time Table Please see course schedule at e-Campus
Study Board
Study Board for MSc in Economics and Business Administration
Course Coordinator
  • Nicolai J. Foss - Center for Strategic Management and Globalization
Main Category of the Course
  • Globalization, International Business, markets and studies
Last updated on 29 maj 2012
Learning Objectives
At the end of the course, students must:
• be familiar with the main theories of economic organization/the firm - that is, agency theory, transaction cost economics, and property rights theory.
• be able to relate these theories to each other in terms of understanding their main differences and similarities
• apply the theories as decision support in real-life businesss situations, involving for example sourcing decisons, the design of reward systems, allocation of control rights and so on.

Theory of the Firm :
Assessment Home Assignment
Marking Scale 7-step scale
Censorship No censorship
Exam Period October and December/January
Aids Please, see the detailed regulations below
Duration Please, see the detailed regulations below
Two essays (max. 5 pages per student) made individually. Each essays will count for 50% of the grade. The gradereflectsanoverall assessmentof the two essays.The exam will take place in October and November. Make-up/ re-exam takes place in January/February.
Course Content

This course provides economics-based rationales and decision-support concerning important decisions in business firms, such as the design of reward systems, the importance of performance measurement, the allocation of decision rights, etc. Also provided are insights that allow students to analyze the firm's interaction with its environment, particularly suppliers, buyers and complementors. The basic perspective in the course is to see the firm as a “nexus” of contracts. Theories of property rights, transactions costs, and contracts, as well as basic game theory are used to analyze phenomena like bargaining, agency relations, the make or buy decision, adverse selection, signalling, etc. The course provides the foundation of ideas applied in strategic management, corporate finance, and corporate governance.


Teaching Methods

George Hendrikse (2003). Economics and Management of Organizations. McGraw-Hill.
Plus a small collection of classic papers on organizational economics.