Study On The Theory Of The Firm Based On Specialization

Business organizations have changed substantially in the past more than 20 years. The altered nature of the firm makes it turn out to be necessary reconsidering much of what a majority of economists take for granted in the theory of the firm. Perhaps the most important difference is the increased importance of human capital relative to inanimate assets. Human capital seems to be more directly enslaved to new classical principles on the basis of economies of specialization and division of labor although it still is not bright whether the resource is suited to neoclassical economies of scale and scope, a sort of conceptions of purely technological economies. As a synthesis of economies of technology and organization, economies of specialization and division of labor are therefore a more appropriately visual angle of comprehending these changes. This paper begins from the Holmstrom-Kaplan (HK) problem (that is why new economy enterprises choose an independently administrative form), and attempts to develop a self-generation theory of the firm.First question that must be faced is if there is a competitive equilibrium when increasing returns to specialization exist. This paper has provided an exemplified attestation for the existence of equilibrium division of labor based on specialization by constructing a m-person symmetry supermodular game and using lattice theory and Tarski's fixpoint theorem, and utilized multiplier effect grounded on product transaction efficiency parameter, (, with unchanging economies of specilization to renewedly enlighten intrinsic implication of evolution of division of labor. And then, this paper switches to formal analyses of the firm.The fundamental connection of the firm is the employment relationship between employers and employees. However, it is in reality an interpersonal correlation although some economists would like to look upon it as the contract between capital and labor. It usually can be seen that an employee serving a company departs from afterward the firm and establishes her own enterprise, in which the pivotal change is that she turns into an employer from an employee. Notice, this is the area that mainstream economics rarely intervenes. That is the subject of division of labor based on specialization among employers and employees. The Yang-Ng firm model in new classical economics is the first mathematical representation in this realm. Its virtues are endogenous specialization and general equilibrium and shortcoming is that the Yang-Ng firms have entirely not self-improving ability. The dynamic firm model in this paper has supplied the gap and proved that employees' investments of their firm-specific human capital are significant for the growth of the firm in those sectors of employers' investments limited by specialization. Employees' investments become crucial just for the reason of the restriction of specialization on employers' investments. With an employee's investment going up, eonomies of specialization of her production will itself increase and with the increase, the firm-specific degree of her human capital will drop. The latter variation reduces opportunity costs of her resignation or the transfer of her human capital. When an employee is asked to make a greater investment, it will be essential that she newly builds her own enterprise or that the firm modifies its initial control allocation. The division of labor amid employers and employees brings their collaborative contract to be indispensable, and the incompleteness of the contract about the division of labor further impels their teamwork to break down or newly-built enterprises to emerge. The firm derives its rivals from its development, which is called as the self-generation process of the firm. For irrelatively diversified firms, they will destroy values at least at the moment requiring a variety of large investments of firm-specific human capital in view of the fact that they can not adjust control over their each production subsection. Outstretched discussion shows that successful corporat...