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Corporate governance for knowledge production: theoretical foundations and practical implications


Osterloh, Margit; Frey, Bruno S (2006). Corporate governance for knowledge production: theoretical foundations and practical implications. Corporate Ownership and Control, 3(4):164-174.

Abstract

Agency Theory as the dominant view of Corporate Governance disregards that the key task of firm governance is to generate, accumulate, transfer, and protect firm specific knowledge. Three different foundations to the theory of the firm which underpin different concepts of corporate governance are discussed: The traditional view of the firm as a nexus of contracts, the view of the firm as a nexus of firm specific investments and the view of the firm as a nexus of firm specific knowledge investments. The latter view distinguishes two fundamental differences between contracting firm specific knowledge investments in contrast to financial investment: (1) A knowledge worker cannot contract his or her future knowledge in the same way as the exchange of tangible goods. (2) Only insiders can evaluate firm specific knowledge generation and transformation. We suggest a concept of corporate governance that takes investments in firm specific knowledge into account: (1) The board should rely more on insiders. (2) Those employees of the firm making firm-specific knowledge investments should elect the insiders. (3) A neutral person should chair the board. This concept provides a theoretical foundation of corporate governance based in the knowledge-based theory of the firm.

Agency Theory as the dominant view of Corporate Governance disregards that the key task of firm governance is to generate, accumulate, transfer, and protect firm specific knowledge. Three different foundations to the theory of the firm which underpin different concepts of corporate governance are discussed: The traditional view of the firm as a nexus of contracts, the view of the firm as a nexus of firm specific investments and the view of the firm as a nexus of firm specific knowledge investments. The latter view distinguishes two fundamental differences between contracting firm specific knowledge investments in contrast to financial investment: (1) A knowledge worker cannot contract his or her future knowledge in the same way as the exchange of tangible goods. (2) Only insiders can evaluate firm specific knowledge generation and transformation. We suggest a concept of corporate governance that takes investments in firm specific knowledge into account: (1) The board should rely more on insiders. (2) Those employees of the firm making firm-specific knowledge investments should elect the insiders. (3) A neutral person should chair the board. This concept provides a theoretical foundation of corporate governance based in the knowledge-based theory of the firm.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:September 2006
Deposited On:06 May 2008 07:43
Last Modified:05 Apr 2016 12:23
Publisher:Virtus InterPress
ISSN:1727-9232
Official URL:http://www.virtusinterpress.org/additional_files/journ_coc/issues/COC_(Volume_3_Issue_4_Summer_2006_Continued).pdf
Related URLs:http://www.virtusinterpress.org/journals-coc-index.html
Permanent URL: http://doi.org/10.5167/uzh-2464

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