Epistemic economics and organization forms of rationality and governance for a wiser economy

ROUTLEDGE STUDIES IN GLOBAL COMPETITION Epistemic Economics and Organization Forms of rationality and governance for a wiser economy Anna Grandori Epistemic Economics and Organization This book proposes a new approach to economics, management and organization that should help in making economic organization ‘wise’, ‘innovative’ and ‘robust’ in an uncertain and risky world Although the modern economy and society is ‘knowledge intensive’, Anna Grandori argues that the dominant economic, organizational and behavioural models neglect to a large extent the problem of valid knowledge construction and effective knowledge governance The book integrates inputs from economics and behavioural science with insights from the philosophy of knowledge to define new micro-foundations: neither a calculative, deductive and omniscient ‘rational actor’; nor an experiential, adaptive and biased ‘behavioural actor’; but a knowledgeable and imaginative ‘epistemic actor’ The implications for contracts and organizations, sustained also by insights from law, are shown to be far reaching, including a new view of the nature of the firm as an entity-establishing agreement under which to discover uses of resources under uncertainty, and as a democratic institution Anna Grandori is Professor of Business Organization at Bocconi University, Milan, Italy Routledge studies in global competition Edited by John Cantwell Rutgers, State University of New Jersey, USA and David Mowery University of California, Berkeley, USA   Japanese Firms in Europe Edited by Frédérique Sachwald   Technological Innovation, Multinational Corporations and New International Competitiveness The case of intermediate countries Edited by José Molero   Going Multinational The Korean experience of direct investment Edited by Frédérique Sachwald   Global Competition and the Labour Market Nigel Driffield 10 Multinational Firms and Impacts on Employment, Trade and Technology New perspectives for a new century Edited by Robert E Lipsey and Jean-Louis Mucchielli   The Source of Capital Goods Innovation The role of user firms in Japan and Korea Kong-Rae Lee 11 Multinational Firms The global–local dilemma Edited by John H Dunning and Jean-Louis Mucchielli   Climates of Global Competition Maria Bengtsson   Multinational Enterprises and Technological Spillovers Tommaso Perez   Governance of International Strategic Alliances Technology and transaction costs Joanne E Oxley   Strategy in Emerging Markets Telecommunications establishments in Europe Anders Pehrsson 12 MIT and the Rise of Entrepreneurial Science Henry Etzkowitz 13 Technological Resources and the Logic of Corporate Diversification Brian Silverman 14 The Economics of Innovation, New Technologies and Structural Change Cristiano Antonelli 15 European Union Direct Investment in China Characteristics, challenges and perspectives Daniel Van Den Bulcke, Haiyan Zhang and Maria Céu Esteves 16 Biotechnology in Comparative Perspective Edited by Gerhard Fuchs 17 Technological Change and Economic Performance Albert L Link and Donald S Siegel 18 Multinational Corporations and European Regional Systems of Innovation John Cantwell and Simona Iammarino 19 Knowledge and Innovation in Regional Industry An entrepreneurial coalition Roel Rutten 20 Local Industrial Clusters Existence, emergence and evolution Thomas Brenner 21 The Emerging Industrial Structure of the Wider Europe Edited by Francis McGowen, Slavo Radosevic and Nick Von Tunzelmann 22 Entrepreneurship A new perspective Thomas Grebel 23 Evaluating Public Research Institutions The US Advanced Technology Program’s Intramural Research Initiative Albert N Link and John T Scott 24 Location and Competition Edited by Steven Brakman and Harry Garretsen 25 Entrepreneurship and Dynamics in the Knowledge Economy Edited by Charlie Karlsson, Börje Johansson and Roger R Stough 26 Evolution and Design of Institutions Edited by Christian Schubert and Georg von Wangenheim 27 The Changing Economic Geography of Globalization Reinventing space Edited by Giovanna Vertova 28 Economics of the Firm Analysis, evolution and history Edited by Michael Dietrich 29 Innovation, Technology and Hypercompetition Hans Gottinger 30 Mergers and Acquisitions in Asia A global perspective Roger Y.W Tang and Ali M Metwalli 31 Competitiveness of New Industries Institutional framework and learning in information technology in Japan, the US and Germany Edited Cornelia Storz and Andreas Moerke 32 Entry and Post-entry Performance of Newborn Firms Marco Vivarelli 33 Changes in Regional Firm Founding Activities A theoretical explanation and empirical evidence Dirk Fornahl 42 Evolutionary Economic Geography Location of production and the European Union Miroslav Jovanovic 34 Risk Appraisal and Venture Capital in High Technology New Ventures Gavin C Reid and Julia A Smith 43 Broadband Economics Lessons from Japan Takanori Ida 35 Competing for Knowledge Creating, connecting and growing Robert Huggins and Hiro Izushi 44 Targeting Regional Economic Development Edited by Stephan J Goetz, Steven C Deller and Thomas R Harris 36 Corporate Governance, Finance and the Technological Advantage of Nations Andrew Tylecote and Francesca Visintin 37 Dynamic Capabilities between Firm Organisation and Local Systems of Production Edited by Riccardo Leoncini and Sandro Montresor 38 Localised Technological Change Towards the economics of complexity Cristiano Antonelli 39 Knowledge Economies Innovation, organization and location Wilfred Dolfsma 40 Governance and Innovation Maria Brouwer 41 Public Policy for Regional Development Edited by Jorge Martinez-Vazquez and Franỗois Vaillancourt 45 Innovation, Knowledge and Power in Organizations Theodora Asimakou 46 Creativity, Innovation and the Cultural Economy Edited by Andy C Pratt and Paul Jeffcutt 47 Coopetition Strategy Giovanni Battista Dagnino and Elena Rocco 48 Knowledge Intensive Entrepreneurship and Innovation Systems Evidence from Europe Edited by Franco Malerba 49 Innovation in Complex Social Systems Edited by Petra Ahrweiler 50 Internationalization, Technological Change and the Theory of the Firm Edited by Nicola De Liso and Riccardo Leoncini 51 Territory, Specialization and Globalization in European Manufacturing Helena Marques and Francisco Puig 52 Institutional Diversity and Innovation Continuing and emerging patterns in Japan and China Cornelia Storz and Sebastian Schäfer 53 Innovation and Economic Crisis Daniele Archibugi and Andrea Filippetti 54 The Communications Industries in the Era of Convergence Catherine Mulligan 55 Innovation, Technology and Knowledge Charlie Karlsson, Börje Johansson and Roger R Stough 56 Evolution of Competition Laws and their Enforcement Pradeep S Mehta 57 The Economics of Structural Change in Knowledge Francesco Quatraro 58 Economic Geography and the Unequal Development of Regions Jean-Claude Prager and Jacques-Franỗois Thisse 59 Social Networks, Innovation and the Knowledge Economy Edited by Isabel Salavisa and Margarida Fontes 60 The Economics of Creativity Ideas, firms and markets Edited by Thierry Burger-Helmchen 61 Epistemic Economics and Organization Forms of rationality and governance for a wiser economy Anna Grandori Epistemic Economics and Organization Forms of rationality and governance for a wiser economy Anna Grandori First published 2013 by Routledge Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2013 Anna Grandori The right of Anna Grandori to be identified as author of this work has been asserted by her in accordance with the Copyright, Designs and Patent Act 1988 All rights reserved No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Grandori, Anna Epistemic economics and organization: forms of rationality and governance for a wiser economy/Anna Grandori p cm Knowledge management–Economic aspects Epistemics Organizational learning–Economic aspects I Title HD30.2.G723 2013 302.3′5–dc23 012035526 ISBN: 978-0-415-57565-2 (hbk) ISBN: 978-0-203-78677-2 (ebk) Typeset in Times New Roman by Wearset Ltd, Boldon, Tyne and Wear Contents List of tables List of abbreviations Introduction Part I Micro foundations: from bounded to epistemic rationality xi xii 1╇ ‘Models of man’ and the ‘rationality divide’╇ 2╇ Savage and Simon revisited: how both ‘maximizing’ and ‘satisficing’ simplify problems╇ 13 3╇ Endogenizing assumptions: contingent rationality╇ 19 4╇ The ‘psychology’ versus the ‘logic’ of judgement and discovery╇ 22 5╇ The logic of economic discovery: an epistemic decision model╇ 25 6╇ Conclusions╇ 40 7╇ Summary╇ 40 Part II Contracts and the firm beyond transactions: the governance of knowledge and association 1╇ Contract incompleteness and the rationality dividꕇ 44 2╇ How both relational contracting and authority relations have limited capacity of governing uncertainty╇ 47 3╇ Contracting without knowing╇ 52 4╇ Ten theses on the nature of the firm╇ 63 5╇ Relations with extant views of the firm╇ 73 6╇ Summary╇ 77 43 142╇╇ References Grandori, A., Furnari, S (2013) ‘Configurational analysis and organization design: toward a theory of structural heterogeneity’, Research in the Sociology of Organizations P Fiss, B Cambré, A Marx (eds) Configurational Theory and Methods in Organizational Research) 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J.N 92 Battigalli, P 45 Baumol, W.J 19, 122, 132n3 Bavelas, A 48 Bazerman, M.H 49 Beach, L.R 19 Becker, G.S 99 Bellis, G.P de 134n3 Bernheim, B.D 47 Blair, M 62, 76 Bloom, M 102 Bonifati, G 121 Bradley, G.H 89 Bradley, R 94 Brennan, G.H 60, 70, 104 Brusco, S 82 Brusoni, S 120 Brusseau, E 44 Buchanan, J.M 51, 60, 70, 100, 104 Burnheim, J 94 Burns, T 49 Burt, R.S 89, 119 Burton, R 98, 135n14 Butler, R 134n1 Byrne, R.M.J 117 Calvino, I 135n15 Campbell, D.T 29–30 Chater, N 34 Chen, H.T 29 Chesbrough, H.W 120 Cholakova, M 5, 21, 30, 32, 133n9 Clarysse, B 32 Coase, R.H (also Coasian) 49, 73, 78 Cohen, M.D 17, 104 Cohendet, P 89 Colombo, M 120 Crocker, K.J 45–6, 54 Croft, D 30 Cyert, R.M 16, 19 Demsetz, H 48, 64, 74, 77, 99–100, 103 Dyer, D 89 Egidi, M 77 Ehrlich, I 105 Ellinghaus, F 105 Elster, J 35, 37, 133n11 Fehr, E 103 Felin, T 28 Fischhoff, B 18 Fiske, A.P 98 Foley, R 8, 25 Fon, V 105 Foss, K 50 Name index╇╇ 151 Foss, N.J 49, 98–9, 102, 108, 112, 133n1 Freeman, J 121, 135n16 Freeman, R.E 92 Frey, B.S 33, 90, 94, 101–2, 135n6 Fried, C 46, 60 Friedman, M (also Friedmanian) 10, 13 Fuchs, C 93 Furlotti, M 5, 54–5, 105–6 Furnari, S 5, 108, 110, 112, 134n1, 135n13 Gaillard, Giordani L 32, 66–7, 91–2, 102, 111, 116, 119, 132n8 Galbraith, J.R 49, 98 Gavetti, G 20 Gibbons, R 116 Gigerenzer, G 8, 20, 23 Gilboa, I 133n12 Gilsing, V 89 Glanchant, J.-M 44 Goldberg, V.P 43, 54 Grandori, A 3–4, 8, 11, 14, 16, 18, 20–1, 25, 30–2, 34, 37, 47, 51, 54–5, 57, 60, 62, 66–7, 69, 74–6, 80, 82, 85, 88, 91, 92, 96, 98, 99, 102–6, 108, 110–12, 115–17, 118, 119, 132n7, n8, 133n9, 134n3, n1, 135n7, n10 Grant, R.M 75 Greenwood, R 91 Grossman, S 52, 66 Gulati, R 120 Gustafsson, V 28 Haas, P 89, 93 Håkanson, L 75 Hannan, M.H 121, 135n16 Hansmann, H 51, 62, 66, 70, 76, 88 Hanson, N.R 24, 132n6 Harrison, J.S 92 Hart, O 10, 44–5, 49–52, 61, 66, 70, 76, 88 Hatchuel, A 25 Hayek, F (also Hayekian) 3, 18, 44, 73, 78–9, 83, 88, 93, 104, 125 Hayton, J 92, 112 Henderson, R 26 Hennart, J.F 82, 89, 97 Hesterly, W.S 98, 101, 121 Hodgson, G 62 Holmstrom, B 50 Jensen, M.C 49 Jones, C 89 Julien, P.A 28 Kahneman, D 8, 22, 24, 101 Kaplan, S.N 32 Katzenbach, J.R 89 Kiss, O 2, 24 Klein, B 47 Klein, P.G 112 Knight, F.H (also Knightian) 18–19, 25–6, 30–1, 33–4, 37, 40–1, 60, 77, 126, 133n10 , n12 Kogut, B 75, 121 Kraakman, R 76 Kranton, R.E 24 Kreps, D.M 92 Lakatos, I 2, 8, 24–5, 30, 104 Lakhani, K 93, 120 Lammers, C 91, 94 Lancaster, R 51 Langlois, R.N 18, 74, 77 Laursen, K 102 Lawrence, P.R 81, 89, 97, 105 Lazonick, W 51 Lerner, J 54 Levinthal, D 88 Lewicki, R.J 49 Lichtenstein, S 34 Lindblom, C.E 17 Lindkvist, L 134n1 List, C 88 Loasby, B 2, 105 Locke, E.A 36, 101 Lorsch, J.W 81, 89, 97, 105 Macaulay, S 48 McGrath, R.G 32 MacMillan, I.C 32 Macneil, I.R 47 Maggi, G 45 Magnani, L 28 Man, A.P de 89 March, J.G 16, 48–9, 79, 98 March, L 37 Marshall, A (also Marshallian) 119, 134n6 Martin, B 94 Maskin, E 52 Masten, S.E 46, 54, 60 Meckling, W.H 49 Ménard, C 82 Merges, R.P 54 Meyer, A.D 107 Michailova, S 99 Miles, R.E 89 Milgrom, P 74, 102, 107–9 152╇╇ Name index Milkovich, G.T 102 Miller, G.J 98, 110 Mitchell, T.R 19 Moore, J 10, 44–5, 66, 133n1 Murphy, K.M 99 Musgrave, A 8, 24 Nagel, E 10–11, 46 Neri, M 5, 116 Nickerson, J.A 103, 122 Nisbett, R 101 Nooteboom, B 75 North, D.C 97 O’Reilly, C.A 97, 108 Oaksford, H 34 Obel, B 98, 135n14 Oberkampf, W.L 18 Osterloh, M 33, 94, 102, 135n6 Ouchi, W.G 48–9, 134n1 Parisi, F 105 Payne, J.W 19 Pencavel, J 91 Penrose, E 31, 74 Pfeffer, J 116 Popper, K.R (also Popperian) 10, 24, 28–9, 34, 37, 133n10, n12 Poppo, L 48 Posner, R 61, 105 Prencipe, A 51 Prendergast, C 102 Puranam, P 99 Quandt, R.E 19 Radner, R 23 Raiffa, H 18, 82, 89 Rajan, R.G 50 Rama, R 119 Ravendraan, M 99 Rawls, J (also Rawlsian) 31, 44, 53, 60, 104 Reynolds, K.J 45 Richardson, G.B 74 Rivkin, J.W 20 Roberts, J 74, 102, 107–8, 111, 121 Ross, l 101 Rossi, P.H 29 Rozeff, M 90 Russell, B 10 Sacconi, L 43 Sah, R.K 83–6, 90, 95 Sarasvathy, S 32 Savage, L.J 7, 12–14 Schramm, C 72 Schreier, M 93 Schum, D.A 61 Schwing, C 121 Sen, A 35, 132n1, 133n11 Shackle, G.L 2, 8, 10, 28, 32 Shleifer, A 66 Simon, H.A (also Simonian) 3, 5, 7–8, 11–13, 15–18, 23–5, 36, 41, 48–51, 73, 79, 81–3, 96–8, 104, 132n2 Sloan, A.P 89 Smith, D.K 89 Smith, H.E 61 Soda, G 5, 106, 108, 116–17, 118, 135n10, n13 Stalker, G.M 49 Staw, B.M 101 Steinbruner, J.D 17 Stiglitz, J.E 83–6, 90, 95–6 Sturm, T 20 Suarez-Villa, L 119 Thagard, P 30 Thaler, R.H 24 Thompson, J.D 79, 81, 98–9 Thompson, L.L 36 Tirole, J (also Tirolean) 10, 13, 45, 49, 52–3 Trochim, M.K 29 Tuden, A 81 Tullock, G 51, 101 Tushman, M 97, 108 Tuzet, G 61 Tversky, A 24 Uzzi, B 51 Vaghely, I 28 Van De Ven, A.H 98, 105 Vanberg, V.J 99 Vanhaverbeke, W 120 Villani, M 121 Vishny, R.W 66 Vlaar, P.W.L 105 Volberda, H.W 105, 120–1 Weber, M 49 Weick, K.E 75 Whinston, M.D 47 Whittington, R 110 Williamson, O.E 44–5, 48, 74–5, 79, 96, 98–9, 101, 134n1 Name index╇╇ 153 Windolf, P 72 Winter, S 104 Wright, T 105 Zander, U 75, 121 Zenger, T.R 28, 48, 98, 101, 103, 121–2 Zingales, L 50 Subject index Page numbers in italics denote tables, those in bold denote figures abduction 25, 27–8, 30, 61, 132n5; see also retroduction acceptability 11, 15–19, 21, 36–7, 49, 71, 113, 115 agency: agency-based hierarchies 85, 91, 103; agency relation 52, 103; agency theory 83, 102 aspiration level (also AL) 11, 15–17, 21, 30, 35–6, 65, 114–15, 132n2 asset/s: asset-based (firms, forms) 50, 63–4, 66–7, 70–1, 76–7; asset ownership 49–51, 59–60, 68, 70; asset partitioning and shielding 62, 64–7, 76; asset pooling 72, 74–5 authority 3, 48–52, 72–3, 79, 103, 107, 109–10, 127, 135n8; authority and agency 103, 106; authority-based employment contracts 49; authoritybased hierarchies 75, 85, 91, 96, 103; authority relation 3, 12, 43, 47–52, 72–3 Bayesian approach 133n10, n12; Bayesian learning 23, 34, 37; Bayesian updating 10 case: Canavelas Consortium case 64, 134n2; Egon Zehnder case 91–2; Genoa’s Harbour case 112–13, 114, 116–7; Green Move Project case 38–9, 133n13; Itaca Nova case 68–9, 134n5; Lincoln Electric case 111; Nano Active Film case 68–9; Olive Water case 27–9, 3M-Polycom case 55, 58 committee/s 39, 59, 84–7, 89, 91, 93, 94–5, 119 comparative qualitative analysis (also CQA) 108 complementarity 74, 76, 79, 107–11, 124 configuration 3, 68, 80, 91–2, 95–6, 107–8, 111, 117, 119–20 constitution/constitutionality 54, 77, 106, 120, 123 constitutional: constitutional contract 55, 72; constitutional economics 4; constitutional governance 3, 120; constitutional order 66; constitutional rules 3, 104–6 contracts/contracting 2–3, 9, 31, 40, 43–55, 56, 57, 58–79, 97–8, 105, 114, 115, 117, 119–20, 122, 124, 125, 133n1, n4; complete contracts 46–7, 52, 59; firm-like contracts 63, 74, 125; incomplete contracts 44–7, 49, 54, 59, 124; optimally incomplete contracts 45; Pareto-efficient contracts 12; relational contracts 3, 43, 47, 50, 52, 54; contracts of society 3, 62–4, 67, 76, 78 cooperative (firm) 65–6, 76, 91, 112 corporate: corporate entrepreneurship 51, 112; corporate form 62, 65, 71, 76–7; corporate governance 5, 77, 94, 117, 125, 135n6 corporation 51, 62–3, 66–7, 76, 91–2 delegation 49–52 demarchy/demarchic 93–4, 101, 135n6 democracy/democratic 59, 65–6, 77–8, 85–6, 89–91, 93–6, 101, 109, 118–19, 125, 127, 135n6 discovery 1–4, 7, 8–9, 17, 22–8, 30, 34–5, 37, 44, 47, 61, 63, 72–5, 77–82, 86–9, 92, 95–6, 100–2, 104–6, 112, 114, 116, 118–19, 121–4, 133n12; ‘discovery effects’ 80, 112 Subject index╇╇ 155 discrete structural alternatives (also DSA) 3, 4–5, 79–80, 96, 117 endogenization of assumptions 4, 7, 19, 40 ‘equifinality’ 111 evaluation research 29 fit: external fit 107, 110, 112; internal fit 107, 112 flexible formalization 120 generative design 3, 4, 80, 117, 122, 135n14 heuristics 3, 8, 16–20, 22–3, 25, 30–1, 33, 34, 40, 104, 115–17, 121, 124, 125, 135n14; heuristics and biases 23; fast and frugal heuristics 8, 23; rational heuristics 3, 18, 26–7, 30, 34–5, 40, 59, 116, 118, 132n7; slow and savant heuristics 23 hierarchy/hierarchical 3, 48, 63, 75, 79–87, 89–92, 94–8, 102–3, 113, 119–20, 124, 127, 135n7, n8 human capital (also HC) 50, 52, 63, 66–7, 69–70, 76, 117–18; HC ‘inalienability’ 63 improvement: logic of improvement 36, 115–16, 118; Nash-improvement 37, 39, 59, 123; Pareto-improvement 37, 39, 59, 89, 115, 123 interest 3, 18, 20–1, 35–6, 48, 52, 63, 72, 75, 85, 88, 89, 94–5, 99, 112, 116, 118–19, 122, 125, 133n11, 134n1 KGP (‘Knowledge, governance and projects’ Research Project) 5, 54–5, 67, 69, 134n2 knowledge: knowledge-based views 74–5, 81, 101; complete knowledge 9–10, 12, 14, 40, 44, 125, 132n3; knowledge construction 1, 12, 16; knowledgeintensive economy 13; knowledge governance 1, 73, 80, 99, 101 learning: Bayesian learning 10, 23, 34; learning by doing 20; experiential learning 1; Popperian learning 37; rational learning 9, 16, 93, 101, 103 legal entity 62, 67, 70, 75 limited liability 65, 68–70 market 3, 20, 28, 32, 66, 72–3, 76, 79–83, 85, 96–8, 100, 108–9, 112, 121–2, 124–6, 127–31, 134n1 maximizing/maximization 7, 10, 13–15, 17–20, 36, 70–1, 82–3, 95, 115, 132n1, n3; utility maximizing 12, 13–15, 30, 44, 82, 114–15, 125; value maximizing 10, 12, 14, 21, 23, 30, 40, 80, 83, 132n3 modularity/modularized 83, 108 multi-modal/multimodality 3–4, 111–12, 116, 121–3, 125–6 multipurposedness 30, 37 negotiation 9, 32, 35–7, 54, 58–9, 67, 82, 87, 89, 101–4, 110, 112–14, 116–17, 119; ‘negotiation effects’ 80, 112, 123 objective alignment 88 optimally incomplete contracts 45 optimally incomplete decision 19, 45 panarchy/panarchic 3, 79, 87, 90–5, 101–2, 119, 122, 125, 134n2, n3 pattern-recognition 20, 25, 27–8 pay for performance 98, 101–3, 108–9, 117, 127 people-based (firms, forms) 63–5, 70 polyarchy/polyarchic 84–6, 90, 134n2 preference/s 8–9, 13–14, 17–18, 34–6, 43, 48, 51, 59, 67, 70, 87–8, 94, 117, 118–19, 127, 133n11 price/pricing 10, 35–6, 40, 51, 54–5, 73, 79, 82–3, 85, 98, 100–3, 106, 108–10, 127, 132n2 probability 18, 21, 34, 37, 84, 122, 133n10, n12 problem model 13–14, 20–1, 26, 28–9, 34 problem shifting 30, 88 property rights (also PR) 45, 49, 50, 53, 56, 57, 59, 60–1, 63–4, 66–9, 69, 70, 75–6, 79, 88, 102, 105, 106; property rights theory (also PRT) 44–5, 47, 49, 51–2, 64, 75, 83, 134n1 rationality: bounded rationality 3, 7, 9–12, 17, 22, 29, 40, 45, 75, 77, 80–1, 96, 98, 104, 124, 132n3, 133n1; contingent rationality 7, 9, 19, 21–2, 40, 132n3; ‘rationality divide’ 7, 9, 43, 44, 81, 124; epistemic rationality (also ER) 3, 7–9, 14–17, 25, 27, 30, 32, 34, 36–7, 40, 44–5, 47, 59, 78–81, 87, 95, 99–100, 103, 118, 123; instrumental rationality 8–9, 14–17, 25, 27, 30, 34, 36, 59, 78–9, 81, 99–100, 103, 118, 122; intended 156╇╇ Subject index rationality 12, 17, 23, 25, 82–3, 87, 96; procedural rationality 15, 22, 104, 133n11; substantive rationality 14–15, 40, 104, 133n11 real option reasoning 32 resources: resource-based views 32, 50, 74–5; resource pooling 59, 63, 74, 78; reasoning on resources 31; ‘resources in search of use’ 59, 77, 121 responsibility: firm responsibility 63–4, 70–1; social responsibility 72, 78, 125 retroduction 24; see also abduction robustness (of actions, structures) 120–2 rules 1, 11, 15–17, 22, 29–30, 48, 53–4, 60–1, 69–70, 82, 85, 91, 93–4, 98, 100, 103–7, 109–11, 120, 127, 134n2 satisficing 5, 7, 11, 13, 15, 16–17, 19–20, 22, 30, 39, 40, 80, 83, 95, 114–15, 132n3 ‘small world’ 13 structural heterogeneity 79, 107, 110–12, 120–3 systems: decomposable systems 83, 95; nearly-decomposable systems 3, 83, 95, 122; non-decomposable systems 79, 87, 95 task complexity 19 team/teaming 21, 29, 32, 33, 38, 48–9, 59, 67, 68–9, 88–9, 98, 102–3, 106, 107–11, 113, 114, 115, 117, 118, 119, 127, 134n1 ties 48, 83, 86–7, 89, 95–6, 103 transaction cost economics (also TCE) 44–5, 73, 83, 98, 134n1, 135n7 uncertainty: aleatory uncertainty 18, 102–3; epistemic uncertainty 18, 22, 26, 30, 33, 41, 45, 47, 60, 77, 101, 125–6; Knightian uncertainty 18–19, 25–6, 31, 33, 37, 40–1, 60, 77, 126 unforeseen contingencies 10, 46, 53, 133n1, 134n1 veil of ignorance 31–2, 53, 60, 104, 121 venture capital (also VC) 67–9 voting 58, 70, 85–7, 91, 93–4, 100–3, 106, 110, 119 ... Economics and Organization Forms of rationality and governance for a wiser economy Anna Grandori Epistemic Economics and Organization Forms of rationality and governance for a wiser economy Anna... British Library Library of Congress Cataloging in Publication Data Grandori, Anna Epistemic economics and organization: forms of rationality and governance for a wiser economy/ Anna Grandori p cm... III Organization design beyond comparative assessment: the discovery of forms, and forms for discovery 79 1╇ Organization forms and forms of rationality •‡ 81 2╇ How both markets and hierarchies