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Economic Organization in the Knowledge Economy - Some Austrian Insights

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I critically discuss recent claims about economic organization in the emerging“knowledge economy,” specifically that authority relations will tend to disappear(or at least become radically transformed), the boundaries of the firm will blur,and coordination mechanisms will be much more malleable than assumed inorganizational economics, resulting in various “new organizational forms.” Inparticular, the price mechanism will be used inside hierarchies to a much greaterextent. In order to obtain an analytical focus on the knowledge economy, Iassume that it may be approximated by “Hayekian settings” (after Hayek 1945),that is, settings in which knowledge is distributed and where knowledge inputsare relatively more important in production than physical capital inputs. I thenargue, drawing on organizational economics as well as Mises’ insights inproperty rights and comparative systems, that the presence of Hayekian settingsdoes not mean that authority will disappear, etc., although economicorganization will in fact be affected by the emergence of the knowledgeeconomy. This suggests that Austrian economics has an important contributionto make to the study of economic organization.

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Nicolai J. Foss

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