DBA Program
COURSE SYLLABUS
Course Title
Theory of the Firm
Course Number
DOCT 723
Credits
4 credits
Professor
Professor Ingo Böbel, Dr., Dr. habil.
Contact Information
Professor’s Phone Number: + 377 97 986 986
Professor’s email: ibobel@monaco.edu
Professor’s Website: http://ibobel.pbworks.com
Professor’s Office Location : IUM Monaco - Room 204
Course Schedule
Nov. 17, 2014 – Feb. 2015 (12 weeks)
Professor office hours
By appointment
Course Description
Competition has fundamentally intensified over the past decades. Many companies today spread
out their value chains across numerous locations. Thus, sound economic analysis has never been
more important - regardless whether the decision-making unit is an individual, household, firm, nonprofit organization, or government. The integrative approach used in this course will help our DBA
students to recognize that important managerial decisions are interdisciplinary. Therefore, the
business firm is treated as a unified whole, rather than a series of discrete, unrelated parts.
The course THEORY OF THE FIRM is one of the “Foundation Courses” in the IUM DBA Program. As
such – and given that we address a wide range of questions - it requires a thorough knowledge of
the “Development of Economic Thought”. Based on extensive readings from numerous classical
economists the course provides the students with the intellectual fundament to better understand
very difficult questions, such as: Why do firms exist? What is their function, what determines their
scope? How do markets work? What is the role of business in society? These are obviously important
questions for both entrepreneurs and business executives who act as “strategists” in highly
competitive local and global markets.
In order to deepen the intellectual fundament, the students will learn where conceptual frameworks
come from and how they have led (in a somewhat chronological order) to the development of
managerial economic theories. We then evaluate, interpret and assess the consequences of
different forms of market structure in a business context. We focus on the economic behaviour of
actors participating in individual markets and industries under different forms of market structure.
We also focus on the history of (competitive or business) strategy on both the firm and industry
level. Strategy is closely linked to the economic phenomenon of “choice”. Making choices and the
reasoning behind this process will be inquired. We conclude with a discussion of most recent
developments in business strategy that are related to “Creating Shared Value”, a new business
model where both economic and social value are co-created.
Course outcomes
Ingo Bobel
DOCT 723 Fall 2014
Theory of the Firm
1. Through provision of a solid historical foundation of economic understanding and the
“economic way of thinking” for use in managerial decision making, students should be able
to
a. Demonstrate the ability to evaluate the micro- and macroeconomic influences on
business managers.
b. Understand the extent of the Market.
c. Understand the Foundations of Market Structure.
d. Understand Competitive Strategy on the firm and industry level.
2. Through enhancing students’ “managerial intelligence”, i.e., the ability to respond quickly
to economic developments and changes at local, national and international levels, students
should be able to
a. Master real-world firm and industry productivity issues.
b. Put economic events into historical perspective so that they are able to better
evaluate, interpret and assess the consequences of different forms of market structure
c. Understand the link between Competitive Strategy and Market Structure to better evaluate
the process of value creation on the Company and Industry Level.
Sources
Most of the course material is based on scientific articles published in peer-reviewed journals which
are available through Ebsco (however, whenever possible, I added the link in order to directly access
the article on the internet).
I recommend to buy a copy of the book by Robert L. Heilbroner (The Worldly Philosophers (any
edition will do – I use the 7th ed. 1999), NY: Simon & Schuster) as it is helpful to better understand
the “Development of Economic Ideas”.
Additional readings and other supporting material that enriches the course content will be given in
the syllabus and during the weekly online course delivery process.
Final hint: the following sources are of general relevance: The Library of Economics and Liberty
(EconLib) (http://www.econlib.org/index.html) for guides and any topics in economics (excellent
source). Other suggested Web Sites on the History of Economic Thought: Nobel Prize Winners in
Economics. (http://almaz.com/nobel/nobel.html); EH.net website: http://eh.net/
Ingo Bobel
DOCT 723 Fall 2014
Theory of the Firm
Course Outline
This course will run through 12 weeks and will cover the following topics:
Week 1: Historical Foundations of the “Economic Way of Thinking” for use in Managerial
Decision Making


Introduction to the course
Discuss Historical Foundations for Managerial Decision Making: The Economic Revolution
Readings:
Heilbroner pp. 1-41;
M. Blaug, No History of Ideas, Please, We’re Economists (The Journal of Economic Perspectives
2001): http://www.jstor.org/stable/pdfplus/2696545.pdf?acceptTC=true&jpdConfirm=true
Optional: Good background information on Smith’s life: N. Phillipson (2010), Adam Smith: An
Enlightened Life. Penguin Books.
Week 2: Historical Foundations Cont’d.




Adam Smith
Pre-«Wealth of Nations»: Theory of Moral Sentiments
The Wealth of Nations
D. Ricardo
Readings:
Heilbroner pp. 42-103 ;
R. Dorfman on “Th. R. Malthus and D. Ricardo” (The Journal of Economic Perspectives, Vol. 3,
No. 3 (Summer, 1989), pp. 153-164)
http://www.jstor.org/stable/pdfplus/1942767.pdf?acceptTC=true&jpdConfirm=true
Week 3: From Classical Economics to Neoclassical Economics and after




A. Smith and F.A. Hayek
K. Marx
M. Friedman and Positive Economics
Economic Theory after Neumann/Morgenstern (Game Theory)
Readings:
K. Marx - Selected Texts in Economics, History and Social Science, in: D.M. Hausman, The
Philosophy of Economics, 3rd. ed, CUP 2008, pp. 108-128
Ingo Bobel
DOCT 723 Fall 2014
Theory of the Firm
Marx’s Theory of Political Behavior (from Understanding Society) and Marx’s Critique:
http://understandingsociety.blogspot.fr/2009/06/marxs-theory-of-political-behavior.html
http://understandingsociety.blogspot.com/2011/07/marx-critique.html
Marx Internet Archive : http://www.marxists.org/archive/marx/index.htm
EconLib: http://www.econlib.org/library/Enc/Marxism.html
R. P. Murphy, Chicago School vs. Austrian School: http://mises.org/daily/5390/The-ChicagoSchool-versus-the-Austrian-School
M. Friedman, The Methodology of Positive Economics, in: D.M. Hausman, The Philosophy of
Economics, 3rd. ed, CUP 2008, pp. 145-178;
[optional for Friedman:
(http://www.amazon.com/gp/product/0226264033?ie=UTF8&tag=danlithompag20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0226264033)]
Introduction to Neumann-Morgenstern’s Theory of Games and Economic Behavior
(downloadable): https://ideas.repec.org/h/pup/chapts/7802-i.html
Also consult EconLib: http://www.econlib.org/index.html
Week 4: The Invisible Hand in Modern Economics


James Tobin and J. M. Keynes’ role.
Origins of the German Social Market Economy
Readings:
Tobin’s article (Cowles Foundation 1991) http://cowles.econ.yale.edu/P/cd/d09b/d0966.pdf
K. Zweig (Adam Smith Institute 1980) on the intellectual roots of the German Social Market
Economy: http://www.adamsmith.org/wp-content/uploads/social-market-economy.pdf
Week 5: Early Evolution of Strategy

Sun Tzu, Machiavelli and after (Clausewitz)
Readings:
Sun Tzu, The Art of War, Oxford UP 1963
The Economist: Sun Tzu and the art of soft power (Dec. 17, 2011):
http://www.economist.com/node/21541714
Week 6 : The Development of the Nature of the Firm, Competitive Strategy and Management
Strategy (Part 1)
Ingo Bobel
DOCT 723 Fall 2014
Theory of the Firm
 The Role of Industrial Revolutions (1750-1850 ; 1850 and after)
 The Role of Academic Institutions
 R. Coase (1937)
 A. Chandler and P.F. Drucker
Readings:
A.Maddison, The World Economy-A Millennial Perspective, OECD 2001
(http://www.theworldeconomy.org/)
R.H. Coase, Nature of the Firm (http://www3.nccu.edu.tw/~jsfeng/CPEC11.pdf )
P. Ghemawat, Competition and Business Strategy in Historical Perspective, HBS Case 798-010
(http://papers.ssrn.com/sol3/papers.cfm?abstract_id=264528)
A.D. Chandler, Organizational Capabilities and the Economic History of the Industrial Enterprise,
J Econ Perspectives 1992
(http://www.ie.ufrj.br/hpp/intranet/pdfs/1633chandlerorgcapabilities.pdf)
P.F. Drucker, The Age of Social Transformation (1994) (http://www.alqiyamah.org/pdf_files/age_of_social_transformation_(theatlantic.com).pdf)
Week 7: The Development of Competitive Strategy and Management Strategy (Part 2)



The Role of Industrial Organization (Role of The Structure-Conduct-Performance
Paradigm)
Principal-Agent Theory (Jensen and Meckling)
The Modern Corporation (Williamson)
Readings :
I. Bobel, Markets and Market Structure (short summary) (2011)
(http://ibobel.pbworks.com/w/page/5692448/DBA%20Program%20Information)
M.C. Jensen and W.H. Meckling, Theory of the Firm, J of Fin. Econ. 1976
(http://papers.ssrn.com/sol3/papers.cfm?abstract_id=94043)
O.E. Williamson, Theory of the Firm as Governance Structure, J of Econ Perspectives 2002
(http://www.jstor.org/discover/10.2307/3216956?uid=379163661&uid=3738016&uid=3640708
41&uid=2&uid=3&uid=67&uid=62&sid=21104378373681)
O.E. Williamson, The Modern Corporation, J Econ Lit. 1981
(http://www.jstor.org/discover/10.2307/2724566?uid=379163661&uid=3738016&uid=3640708
41&uid=2&uid=3&uid=67&uid=62&sid=21104378885511)
Week 8 : Understanding Industry Attractiveness


M. E. Porter
The Five Competitive Forces that Shape Strategy
Readings :
M. E. Porter, The Five Competitive Forces that Shape Strategy, HBR 2008
(http://www.exed.hbs.edu/assets/documents/hbr-shape-strategy.pdf)
Week 9 : Strategic Positioning
Ingo Bobel
DOCT 723 Fall 2014
Theory of the Firm


Strategic Positioning
“What is Strategy?”
Readings :
M. E. Porter, What is Strategy ?, HBR 1998 (http://www.engr.mun.ca/~amyhsiao/strategy.pdf)
Week 10 : Recent Developments in Business Strategy (I)

Creating Shared Value – The Original Concept
Readings:
M. E. Porter and M. Kramer, Creating Shared Value, HBR 2011
(http://www.waterhealth.com/sites/default/files/Harvard_Buiness_Review_Shared_Value.pdf)
Week 11: Recent Developments in Business Strategy (II)

From Strategy 1.0 to Strategy 2.0 – New Insights into Strategy
Readings:
M.E. Porter and M. Kramer, Creating Shared Value, HBR 2011;
(http://www.waterhealth.com/sites/default/files/Harvard_Buiness_Review_Shared_Value.pdf)
Contesting the value of CSV: (http://www.jstor.org/stable/10.1525/cmr.2014.56.2.130)
I. Bobel, Reimagining Business Strategy (Draft - Paper under construction) 2014
Week 12: Wrap Up of the Course
Discussion Board (DB) and Chat
Effective and engaging online discussions are a very important component of this course. Just like in
a traditional class, you will be expected to actively participate in discussions with your instructor and
fellow students.
Discussion Board and Discussion Board Posting Policy
The Discussion Board (DB) is part of the core of online learning. Classroom discussion in an online
environment requires the active participation of students and the instructor to create robust
interaction and dialogue. Every student is expected to create an original response to the open-ended
DB question as well as engage in dialogue by responding to posts created by others throughout the
week. At the end of each unit, DB participation will be assessed based on both level of engagement
and the quality of the contribution to the discussion.
The purpose of the DB is to allow students to learn through sharing ideas and experiences as they
relate to course content.
Ingo Bobel
DOCT 723 Fall 2014
Theory of the Firm
Live Sessions
Day of the week
TBD
Start time
End time
Duration
Library
The link to the online library is found on the course website so that you have ready access to research
the library at any point in any Unit.
Course Evaluation
Graded Learning Events
The final grade is composed of students’ performance shown in the following grade categories:
Individual Assignments, Attendance and Discussion Board/Group Work participation.
Every Unit (except Week 1) includes assignments that consist of either the delivery of “Individual
Projects”, participation in the “Discussion Board” and/or “Group Work”. More detailed instructions for
each assignment type are provided within the unit topic identified for each week.
Each assignment concludes with a deliverable product. Deliverable products may range from a
paragraph narrative, a paper, a PowerPoint Presentation, or an analysis of the assignment.
Class participation
Online students are required to participate in their online courses in an academically-related activity
comparable to the minimum of two contact hours of instruction in a seven-day calendar week
(Monday to Sunday) for each week.
The professor tracks the course participation weekly and will contact students who have fallen
behind in course assignments.
Course Policies
Ingo Bobel
DOCT 723 Fall 2014
Theory of the Firm
Academic Honesty
At International University of Monaco, students are expected to demonstrate academic integrity by
completing their own work, assignments and assessments. Effective planning and progress must be
accomplished for students to be successful in their degree program of study.
Submission of work from another person, whether it is from printed sources or someone other than
the student and/or papers submitted without source citation can result in a failing grade or be
reported to the campus Academic staff for appropriate sanctions or disciplinary actions that may
lead to dismissal from the University.
All students are expected to adhere to the standards set forth in the Student Code of Conduct and
Statement on Academic Honesty.
For IUM Online course work, please note that learning events are to be that of the student's own
work, and group projects are collaborative efforts.
Cheating
Cheating shall be defined as:
- Copying to any extent the work of another student
- Intentionally assisting another student during an examination
- Having access to material related to an examination during an examination
- Possessing or having access to unauthorized copies of an examination
- Departing from any stated examination conditions.
Plagiarism
Oxford Dictionary defines plagiarism as "the practice of taking someone else’s work or ideas and
passing them off as one’s own”
Plagiarism involves:
- Submitting another person's work as one's own
- Submitting work from any source that is not properly acknowledged by footnote,
bibliography, or reference within a paper
- Submitting work pieced together from phrases and/or sentences from various sources
without acknowledgement
- Submitting work with another person's phrase(s) rearranged without acknowledgement
- Submitting work that uses any phrase, sentence, or stylistic mannerism without
acknowledgement
- Omitting quotation marks from any directly quoted material
- Failure to use three dots (...) to indicate omission of one or more words
Grading Scale
Ingo Bobel
DOCT 723 Fall 2014
Theory of the Firm
Grades are reported at the end of each term.
Grade points are assigned to letter grades for each unit of course credit:
.
Letter Percentage Grade
Quality of work
Grade
Points
Points
Outstanding performance, works shows superior command of the
A
95-100%
4.0
subject
Very good work showing understanding and mastery of all
A90-94%
3.7
concepts.
Good work showing understanding and mastery of most
B+
87-89%
3.3
concepts.
Fairly good work that shows an understanding of the main
B
83-86%
3.0
concepts.
Fairly good work showing understanding of several important
B80-82%
2.7
concepts.
Uneven understanding of the concepts with occasional lack of
C+
77-79%
2.3
clarity
Work that barely meets modest expectations for the class
C
73-77%
2.0
Work that is below modest expectations for the class
C70-72%
1.7
Poor performance with lack of understanding of several
D+
67-69%
1.3
important concepts
Work that is marginally above the minimum expectations for the
D
63-66%
1.0
class
Work that barely meets the minimum expectations for the class
D60-62%
0.7
Work does not meet the minimum expectations for the class
F
< 60%
0.0
(The syllabus is subject to change – Dec. 2014)
Ingo Bobel
DOCT 723 Fall 2014
Theory of the Firm