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2021/2022  KAN-CFSMO1123U  Theory of the Firm

English Title
Theory of the Firm

Course information

Language English
Course ECTS 7.5 ECTS
Type Mandatory
Level Full Degree Master
Duration One Semester
Start time of the course Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Nicolai J. Foss - Department of Strategy and Innovation (SI)
Main academic disciplines
  • Organisation
  • Strategy
  • Economics
Teaching methods
  • Blended learning
Last updated on 21/12/2021

Relevant links

Learning objectives
1) Students will learn a number of important concepts and basic tools, rooted in modern microeconomics and organizational theory that complement other courses at the FSM Program. 2) Students will acquire tools that can be used to assess, for example, whether an input should be produced internally (in-house) or purchased from the market (buy); how strong incentives should be inside firms; how organizational structures and systems interact and impact organizational performance; how knowledge can be effectively governed within and between firms; etc.

The learning objectives are demonstrated in the exam to the degree to which students can perform along the following dimensions:
  • Understand the core concepts of the course.
  • Use core insights from the class to address key business problems.
  • Show understanding of the differences and similarities between key theories, concepts and insights.
  • Use the theories, concepts and insights to derive meaningful, carefully argued conclusions to the questions in the mini-case in the exam.
Theory of the Firm:
Exam ECTS 7.5
Examination form Home assignment - written product
Individual or group exam Individual exam
Size of written product Please see text below
There is no page limit and students will have 4 hours to complete the exam.
Assignment type Written assignment
Duration Written product to be submitted on specified date and time.
Grading scale 7-point grading scale
Examiner(s) Internal examiner and external examiner
Exam period Autumn
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Description of the exam procedure

The exam is a 4 hour online written exam. The exam includes 1) a multiple choice part and 2) a part with one or more open-ended questions, possibly based on brief case.  The multiple choice part will ask students to give reasons for each choice they make, that is, explain why they choose a specific answer and not the other possible ones

Course content, structure and pedagogical approach

The course provides an introduction to the theories of the firm, including the modern microeconomics of firm organization and the theory and design of organizations. The particular focus is on the internal organization (rewards, the internal division of labor, internal communication, the allocation of authority, etc.) and the boundaries (contracts, ownership positions, alliances, etc.) of firms. The course surveys key ideas that are essential for understanding the internal and external organization of firms, such as asymmetric information, efficiency, incentive conflicts, property rights, specific assets, organizational structures and, organizational decision-making.  The course relates to a number of other courses at the FSM Program, perhaps particularly Strategic Management and Corporate Governance and Finance, and provides part of the foundation for these courses (e.g., transaction cost economics and principal-agent theory are important in both).


In terms of pedagogics, while the teaching is lecture-based, it is interactive, and interspersed with within-lecture exercises and between-lectures exercise classes.  Blended learning will be included to assist, for example, within-lectures exercises (e.g., students will be asked to access beforehand relevant case material, brief prepared tutorials, etc.). To reach continuous feedback aims, there will be a number of short within-lectures multiple choice tests to help students improve their comprehension of the material.

Description of the teaching methods
Lectures interspersed with exercises. Exercises come in two forms: 1) shorter (15-20 mins) within-lecture exercise (typically two exercises per class) and 2) four distinct classes in two tracks specifically on longer, more complex exercises.
Feedback during the teaching period
"Feedback" happens in four different ways in this class. 1) Students are encouraged to actively take part of both the lectures and the exercise sessions by contributing with questions and comments, which will prompt response by the lecturer/exercise instructor. 2) The lectures will feature many small exercises and cases that will also prompt discussion and feedback. 3) There will be a number (2-3) of multiple choice tests during the lectures which will be discussed in class. 4) The exercise classes are designed to apply the tools taught in the lecture classes to cases and exercises and will of course involve classroom discussion and feedback. Of course, students can always get feedback on questions, open issues, etc. by showing up for the office hours.
Student workload
Lectures preparation and participation 66 hours
Exercises preparation and participation 66 hours
Exam preparation 74 hours
Last updated on 21/12/2021