Firms, Governance, and Organisations PDF

Thème 1 : Firms, governance and organisations Chapitre 1 : The firm: evolutions since the early 19th century Chapitre 2 : Firm governance and changes in financial structures Lycée International de Palaiseau Paris-Saclay 2024-2025...

Thème 1 : Firms, governance and organisations Chapitre 1 : The firm: evolutions since the early 19th century Chapitre 2 : Firm governance and changes in financial structures Lycée International de Palaiseau Paris-Saclay 2024-2025 1 Cours de P. Larchet  Chapitre 1 : The firm: evolutions since the 19th century Introduction: What is a firm? I – The entrepreneur, central figure of the firm in the 19th century II – The development of the large enterprise and its governance III – Firms and entrepreneurs before and since 1970 Lycée International de Palaiseau Paris-Saclay 2024-2025 2 Cours de P. Larchet Introduction: What is a firm? ØThe firm as an economic unit with legal autonomy that uses factors of production and intermediate products to produce goods and services sold on a market. ØIt engages in market production, and usually seeks profit (Milton Friedman). ØIt has a decision-making autonomy. ØIt is governed by a legal framework that can (and most of the time will) differ from one country to another. Lycée International de Palaiseau Paris-Saclay 2024-2025 3 Cours de P. Larchet Introduction: What is a firm? France (Insee) United Kingdom (ONS) Since 2008 (loi de modernisation de The UK base their classification on l’économie), a distinction has been made in international standards (unlike France). France between: Therefore, they will overall be less precise - Microenterprises, which are PME employing than France on distinguishing types of firms. fewer than 10 people, with an annual revenue - Micro enterprises: less than 10 employees. or balance sheet total not exceeding €2 - Small enterprises: between 10 and 49 million; employees. - PME (Petites et Moyennes Entreprises) that - Medium-sized enterprises: between 50 and are not microenterprises: they employ 249 employees. between 10 and 249 people and have an - SMEs (Small and Medium-Sized annual turnover not exceeding €50 million (or enterprises): employing less than 250 people. a balance sheet total not exceeding €43 - Large enterprises: 250 people or more. million); - Entreprises de Taille Intermédiaire (ETI) are companies with between 250 and 5,000 employees and an annual revenue not exceeding €1,500 million (or a balance sheet total not exceeding €2,000 million); - Grandes Entreprises (GE) are companies that do not fall into any of the above categories. Lycée International de Palaiseau Paris-Saclay 2024-2025 4 Cours de P. Larchet Introduction: What is a firm? ØOffice for National Statistics (ONS), published 22 November 2023, ONS website, statistical bulletin, Business demography, UK: 2022 ØA global trend from the consequences of uberisation. ØSide effects from Covid and Brexit (especially on the currency policy). ØThe historical development of the firm is linked with the Industrial Revolution. ØThe “first” IR with the “early starters”. ØThe “second” IR with “latecomers”. ØThe “third” IR with the consequences of modernity. Lycée International de Palaiseau Paris-Saclay 2024-2025 5 Cours de P. Larchet I – The entrepreneur, central figure of the firm in the 19th century A. A capitalist entrepreneur in small structures since the industrial revolution ØThe beginning of the Industrial Revolution. ØThe development of corporate forms. B. The innovative entrepreneur as the source of growth ØJoseph Alois Schumpeter and the analysis of the dynamics of capitalism. ØThe fear of a “steady state” overcome? Lycée International de Palaiseau Paris-Saclay 2024-2025 6 Cours de P. Larchet I – A. A capitalist entrepreneur in small structures since the industrial revolution ØThe beginning of the Industrial Revolution. ØThe entrepreneur-capitalist as described by Jacques Turgot. ØFranklin Mendels, 1969, Industrialization and Population Pressure in XVIIIth Century Flanders. ØThe question of social mobility. ØThe development of corporate forms. Lycée International de Palaiseau Paris-Saclay 2024-2025 7 Cours de P. Larchet I – A. A capitalist entrepreneur in small structures since the industrial revolution ØThe beginning of the Industrial Revolution. ØThe development of corporate forms. ØJean-Baptiste Say, 1814, Traité d’économie politique. ØThe 1807 Code du Commerce in France ØLiberalisation in the UK afterwards. ØFollowing Germany with the “Gesellschaft mit beschränkter Haftung”. Lycée International de Palaiseau Paris-Saclay 2024-2025 8 Cours de P. Larchet I – B. The innovative entrepreneur as the source of growth ØJoseph Alois Schumpeter and the analysis of the dynamics of capitalism. ØRichard Cantillon, 1896, Traité théorique et pratique d’économie politique. ØThe Schumpeterian entrepreneur. ØSchumpeter Joseph, 1911, The Theory of Economic Development [Document 2]. ØThe fear of a “steady state” overcome? Lycée International de Palaiseau Paris-Saclay 2024-2025 9 Cours de P. Larchet I – B. The innovative entrepreneur as the source of growth ØJoseph Alois Schumpeter and the analysis of the dynamics of capitalism. ØThe fear of a “steady state” overcome? ØInnovations that happen in “gapes”… Ø…and the source of growth. ØA link between the dynamic of innovation and the source of the revenue. Lycée International de Palaiseau Paris-Saclay 2024-2025 10 Cours de P. Larchet II – The development of the large enterprise and its governance A. Generalised division of labour ØGovernance. ØManagerial capitalism. ØScientific management. B. The key role of hierarchy ØAnalysing the firm as something else than a “black box”. ØTransaction costs and further studies. ØOn the role of managers in the firm. Lycée International de Palaiseau Paris-Saclay 2024-2025 11 Cours de P. Larchet II – A. Generalised division of labour ØGovernance. ØThe difference between stakeholders and shareholders. ØWhy focusing on public limited companies? ØManagerial capitalism. ØScientific management. Lycée International de Palaiseau Paris-Saclay 2024-2025 12 Cours de P. Larchet II – A. Generalised division of labour ØGovernance. ØManagerial capitalism. ØJohn Kenneth Galbraith, 1967, The New Industrial Age. ØFrederick Winslow Taylor, 1911, The Principles of Scientific Management. ØFordism. ØTPS (Toyota Production System) and the five- zero rule. ØScientific management. Lycée International de Palaiseau Paris-Saclay 2024-2025 13 Cours de P. Larchet II – A. Generalised division of labour ØGovernance. ØManagerial capitalism. ØScientific management. ØU-firm and M-firm. ØA generalised division of labour: both in a vertical and a horizontal way. Lycée International de Palaiseau Paris-Saclay 2024-2025 14 Cours de P. Larchet II – B. The key role of hierarchy ØAnalysing the firm as something else than a “black box”. ØThe firm in the “producer theory”. ØCoase Ronald, 1936, “The Nature of the Firm”, Economica [Document 3]. ØFrank Knight, 1921, Risk, Uncertainty and Profit. ØA trade-off between transaction and organisational costs. ØTransaction costs and further studies. ØOn the role of managers in the firm. Lycée International de Palaiseau Paris-Saclay 2024-2025 15 Cours de P. Larchet II – B. The key role of hierarchy ØAnalysing the firm as something else than a “black box”. ØTransaction costs and further studies. ØOliver Williamson, 1975, Markets and Hierarchies. ØA trade-off between “making” and “buying”. ØSpecific assets. ØOn the role of managers in the firm. Lycée International de Palaiseau Paris-Saclay 2024-2025 16 Cours de P. Larchet II – B. The key role of hierarchy Source : Olivier Bouba-Olga, 2003, Économie de l’entreprise Lycée International de Palaiseau Paris-Saclay 2024-2025 17 Cours de P. Larchet  II – B. The key role of hierarchy Market Hybrid Hierarchy Capacity of autonomous ++ + 0 adaptation Capacity of coordinated 0 + ++ adaptation Intensity of the ++ + 0 incentive Degree of administrative 0 + ++ control Type of contract Classical Neoclassical Subordination Based on Oliver Williamson, 1991, “Strategizing, Economizing, and Economic Organization”, Strategic Management Journal Lycée International de Palaiseau Paris-Saclay 2024-2025 18 Cours de P. Larchet II – B. The key role of hierarchy ØAnalysing the firm as something else than a “black box”. ØTransaction costs and further studies. ØOn the role of managers in the firm. ØAdolf Berle & Gardiner Means, 1932, The modern corporation and private property. ØChandler Alfred, 1977, The Visible Hand. The Managerial Revolution in American Business [Document 4]. ØThree different types of capitalism. ØExample of Air Liquide in France. Lycée International de Palaiseau Paris-Saclay 2024-2025 19 Cours de P. Larchet III – Firms and entrepreneurs before and and since 1970 A. The rise and end of the Trente Glorieuses in developed countries ØHistorical reminders about the 1970s. ØA global concentration movement from the end of the 19th century to the 1970s. ØThe dynamics of the “Trente Glorieuses”. B. A new division of tasks between small and large enterprises ØOn the importance of innovation. ØOther roles for SMEs. Lycée International de Palaiseau Paris-Saclay 2024-2025 20 Cours de P. Larchet III – A. The rise and end of the Trente Glorieuses in developed countries ØHistorical reminders about the 1970s. ØFirst oil crisis in 1973 with Arab-Israeli war (or Yom-Kippur War). ØSecond oil crisis in 1979 with the Iranian Revolution. Ø“Stagflation” in the Western world. ØA global concentration movement from the end of the 19th century to the 1970s. ØThe dynamics of the “Trente Glorieuses”. Lycée International de Palaiseau Paris-Saclay 2024-2025 21 Cours de P. Larchet III – A. The rise and end of the Trente Glorieuses in developed countries ØHistorical reminders about the 1970s. ØA global concentration movement from the end of the 19th century to the 1970s. ØChanges in the European production systems to deal with the war economy. ØJean-François Eck, 2009, Histoire de l’économie française. ØThe violence of the 1929 crisis and the New Deal in the US. ØThe dynamics of the “Trente Glorieuses”. Lycée International de Palaiseau Paris-Saclay 2024-2025 22 Cours de P. Larchet III – A. The rise and end of the Trente Glorieuses in developed countries ØHistorical reminders about the 1970s. ØA global concentration movement from the end of the 19th century to the 1970s. ØThe dynamics of the “Trente Glorieuses”. ØDevelopment of the Fordist system with mass consumption. ØInternationalisation of the economies: Ø GATT in 1947. Ø EEC in 1957. ØDevelopment of the technostructure (Galbraith, 1967). ØThe cases of France and Japan. Lycée International de Palaiseau Paris-Saclay 2024-2025 23 Cours de P. Larchet III – B. A new division of tasks between small and large enterprises ØOn the importance of innovation. ØThe context of the “third” Industrial Revolution: the example of Apple. ØAlfred Marshall’s “economies of agglomeration”. ØA “communications revolution”. ØOther roles for SMEs. Lycée International de Palaiseau Paris-Saclay 2024-2025 24 Cours de P. Larchet III – B. A new division of tasks between small and large enterprises ØOn the importance of innovation. ØOther roles for SMEs. ØA global trend of “downsizing” since the end of the Taylor-Fordist mode of production. ØDavid Birch, 1979, The Job Generation Process. ØAuto-entrepreneurs. Lycée International de Palaiseau Paris-Saclay 2024-2025 25 Cours de P. Larchet  III – B. A new division of tasks between small and large enterprises Don't confuse companies, sole proprietorships and micro-entrepreneurs Ø A company is an entity with legal personality. As we pointed out in the introduction to this chapter, many micro-enterprises are companies. They employ fewer than 10 people and have an annual turnover or balance sheet total not exceeding €2 million. They are classified as SMEs; Ø A sole proprietorship is a business whose legal personality is no different from its physical personality. Traditional sole proprietorships refer to sole proprietorships other than micro-entrepreneurs; Ø A micro-entrepreneur benefits from the scheme of the same name (called auto- entrepreneur until 2014 in France), which offers simplified formalities for setting up a business and a simplified method for calculating and paying social security contributions and income tax. It applies to individual entrepreneurs who apply for it, subject to certain conditions. Lycée International de Palaiseau Paris-Saclay 2024-2025 26 Cours de P. Larchet Conclusion ØAbdelnour Sarah, 2017, Moi, petite entreprise, « L’avenir entre libéralisation et résistance » [Document 5]. ØDes employés sous contrainte plus que de réels entrepreneurs. ØDes individus « payés à la tâche sans être couverts par le droit du travail ». ØUne remontée de l’insécurité sociale ? ØL’auto-entrepreneur est-il plutôt dans l’héritage de Schumpeter ou de Marx ? Lycée International de Palaiseau Paris-Saclay 2024-2025 27 Cours de P. Larchet