ABSTRACT
The chapter presents the theoretical building blocks of the authority-based conception of the firm. Understanding the functioning of firms entails understanding why workers cooperate and obey managerial authority. This requires a conception of work and of human behaviour. The way humans experience work must be considered when firms are defined in substantive – that is, productive, not contractual – terms. The first reason workers cooperate derives from the characteristics of work activity, which entails cognitive and affective involvement with work. The second is due to the cooperative and compliance-with-authority norms that emerge from the social interactions in which workers engage while working. To understand firms, we must go beyond calculative rationality and contemplate humans’ emotional and moral abilities – the concern for a job well done, the ability and disposition to jointly develop cooperative norms. These norms stem from the fact that production in firms is a collective venture, an economic venture organised through political means – managerial authority. The political nature of the firm is discussed and the issue of the legitimacy of managerial authority, raised in Chapter 2, is further addressed.
