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Inside And Outside The Black Box - Organization Of Interdependencies

Author

Listed:
  • Andersson, Åke E.

    (Jönköping International Business School (JIBS))

  • Johansson, Börje

    (Jönköping International Business School (JIBS), Royal Institute of Technology (KTH), & Centre of Excellence for Science and Innovation Studies (CESIS))

Abstract
Production theory has remained substantially unchanged since the publication of the Theory of Production by Ragnar Frisch, (1928, 1965). The theory is based on the idea of a firm deciding on the possible input and output combinations of a single unit of production. His theory was substantially copied in contributions by Sune Carlsson (1939) and Erich Schneider (1947), and later by practically all textbooks in microeconomics. The idea is to model the firm as a “black box” in which a finite number of externally purchased inputs are transformed into a finite number of outputs to be sold in the market(s). Most of the time, the prices are externally determined. Often, the production process is summarized by some simplified production function as for example in the form of a CES function. Another and conceptually richer approach is the formulation of an activity analysis model. In the latter case, simple internal interdependencies can be included. In this paper, we indicate how internal interdependencies can also be modeled within a special CES framework. In recent decades, there has been a remarkable growth in the number of production units of firms like IKEA, Walmart and Apple to name a few such global networking firms. Most of the analysis of these network firms has been modeled by logistics and other operations-research analysts and to a limited extent by researchers in business administration schools. Very little has been done in economics. We propose a modelling approach consistent with microeconomic theory.

Suggested Citation

  • Andersson, Åke E. & Johansson, Börje, 2017. "Inside And Outside The Black Box - Organization Of Interdependencies," Working Paper Series in Economics and Institutions of Innovation 461, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    • Handle: RePEc:hhs:cesisp:0461
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    References listed on IDEAS

    as
    1. Steven Tadelis & Oliver E.Williamson, 2012. "Transaction Cost Economics [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    2. Andersson, Ake E & Persson, Olle, 1993. "Networking Scientists," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 27(1), pages 11-21.
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    7. Hollis B. Chenery, 1949. "Engineering Production Functions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 63(4), pages 507-531.
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    9. Mr. Roberto Cardarelli & Ms. Lusine Lusinyan, 2015. "U.S. Total Factor Productivity Slowdown: Evidence from the U.S. States," IMF Working Papers 2015/116, International Monetary Fund.
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    Cited by:

    1. Martin Andersson & Brian H. S. Kim & Janet E. Kohlhase, 2022. "Editorial: developments at the Annals of regional science 2020–2021," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(1), pages 1-7, February.

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    More about this item

    Keywords

    Multilocation firm; management of network firm; collaborative advantages; economies of scale and scope;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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