LOGO
Chapter 1
The Evolution Of The Modern Firm
主講人: 趙琪老師
The Word In 1840
Doing Business in 1840
John’s Decision
What did impact John’s Decisions?
Information
John’s risk attitude and ability
(personal role selection)
The Determinants of Industrial Scale
and Structure
Risk and information

Output uncertainty

1.The willing to invest by their own resource
2.Banks’ willing to finance business expansion

Small firms
Conditions in Business in 1840 :
Life Without a Modern Infrastructure
 Transportations
railroad (case 1. The Emergence of Chicago)
waterway
 Communications
post
telegraph
 Finance
 Production Technology
unstandardized
small firms
 Government
public infrastructure
Case 1
The Emergence of Chicago
Figure 1.1
Summary
Infrastructure

Extended demand and technology
development

High speed and high volume production and
distribution

Change organization and coordination

Transaction costs down
The Word In 1910
Doing Business in 1910
Integration

Large firms

Professional managers

Organizational hierarchy
 Business Condition in1910:
A “Modern” Infrastructure
 Production Technology
Vertical integration  Scale economic
Horizontal integration  scope economic
 Transportation
Infrastructure  throughput  production capacity expansion
 Communications
M-form firms  division and professional managers 
coordination and control problems  (1)overexpansion:
(2)bureaucracy
 Finance
 Government
Professional manager demand  education market 
MBA/university
Case 2
Responding to the business
environment: The case of American
whaling
*No advantage from revolutionizing
technology
*Demand and competition
*Risk
*No scale economic for production &
distribution
 Doing Business Today
The World Today
*Market niche strategy
*Diversity: Distribution channel, skill, and acquire 
Antitrust
*SBU
*Matrix Structure  coordination
* Function outsourcing
 The Infrastructure Today
 Transportation
Automobile and Air Way
Better coordination
 Communication
Fax and Internet
 Finance
Cost and managerial accounting
Activity-based accounting
 Production Technology
CAD/CAM: customizing, high quality, and low cost
 Government
Relax the regulation
Regional free trade zone
Case 3
Evolution of the steel industry
*Early age: vertical integration 
Competitive disadvantage: Specific
assets
*Modern age: Heavy  Light
Competitive advantage: Minimill
advantage
Infrastructure in Emerging Markets
Case 4
Infrastructure in Emerging
Markets
Economic gyrations and traffic gridlock
in Thailand
Summary
Coordination 
Vertical integration 
Three Different World:
Consistent Principles, Changing
Conditions,
and Adaptive Strategies.
*Make: 1910
1.Scale economic accessibility  Firms
were willing to invest
2.Poor infrastructure  Coordination
difficulty  Hierarchy control
*Buy:
1.1840
(1)No scale economic
(2)Poor infrastructure  Limited
market size
2.Today
Infrastructure  coordination cost 
 outsourcing function 
Case 5
Infrastructure and emerging markets:
The Russian Privatization Program
*Goal conflict between manager and
employees
*No incentive
Example1.5
Building national infrastructure:
The transcontinental railroad.
Example1.6
The risks of modernity :The Halifax .
Example1.7
Parties, Scandals, and Directors
Behaving Badly: After the ball.
Example1.8
Blaming Wal-Market: The Prequel.