Reproduced with permission of the copyright owner.  Further reproduction prohibited without permission.

ERRATA
Anonymous
Journal of Small Business Strategy; Fall 2007/Winter 2008; 18, 2; ABI/INFORM Complete
pg. 105

ERRATA 

In Volume 17-1, the article by Mitchell and Cohen had a significant error in that we 
inadvertently omitted a portion of a key table. That table is printed here. If you would 
like a complete copy of the article, please contact me at jsbs@bradley.edu. You may 
also find the article on the Journal of Small Business Strategy website, www.jsbs.org. 
We apologize for the error. 

105 



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Theory Purpose of Theory - The purpose of this Reason for Existence (~ I v. R) - Firms exist: Scale & Scope (~ B v. N) - Scale & Scope 
theory is to: are determined by: 

A-Narrow/ 
I Incremental 

· Agency !Develop a theory of the ownership structure IAs a nexus for contracting relationships, which is also The point at which the gross increment in (firm) 

I (Jensen & 
bfthe firm (Jensen & Meckling, 1976: 305). k:haracterized by the existence of divisible residual value is just offset by the incremental loss 

k:laims on the assets and cash flows of the organization involved in the consumption of additional fringe 

I 

Meckling, 
!Which can generally be sold without permission of the benefits due to (managers') declining fractional 

1976) 
bther contracting individuals (1976: 311) !interest in the firm (1976: 323) 

Customer Suggest that firms' customer value should To satisfy the customer (1997: 164; and Drucker, trhe customer value strategy which dictates the 
Value be the focus of business activities and to 1973) size of the target market and the value 
(Slater, l>ropose a marketing based view of the proposition (1997: 164) 
1997) theory of the firm (Slater:, 1997: 162) 

...... 
g 

Evolutionary Expand our understanding of economic Because a set of capabilities and decision rules trhe joint action of search and selection 
(Nelson& k:hange (Nelson & Winter, 1982) k;ombine and evolve based on the inheritance of 'routines" (Nelson & Winter, 1982) 
Winter, acquired characteristics and the timely appearance of 

I 
1982) !Variation under the stimulus of adversity (Nelson & 

!Winter, 1982). 

Exchange Construct a classical type of macroeconomic To both exchange (where existing assets including trhe personal income distribution (PID), where 
(Boulding, ~istribution theory to distinguish between money are circulated among various owners), and to IPID as a key determinant of output is effected by 
1950) !exchange process contributions to wealth r>roduce (where assets are created, destroyed, and patentially volatile financial transfers item (T) 

k:reation and the processes of production 
"Boulding, 1950; Canterbery, 1994, p. 1227) 

accumulated) (1994: 1227) ~Boulding, 1950; 1994: 1227) 

Industrial To explain how competitive forces within an Because they are portfolios of activities (Porter, !Market structure: " ... certain stable attributes 
Organization mdustry shape the specific responses of 1984: 423) composed of the tangible or intangible bfthe market that influence the firm's conduct in 
(Caves, 1980: ltirms within that industry to the small semi-fixed assets or skills necessary for the conduct lhe marketplace" including size (Caves 1980: 
88; Porter, numbers bargaining power of rivals, of these activities in the marketplace (Caves, 1980: M) 
1980; Porter, 

suppliers, buyers, imitators, and substitutes 64). 1984) 
Porter, 1980) c 

~ 

~ 
I 



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Theory 

'· Institutional (DiMaggio & 
Powell, 1983; Meyer & 
Rowan, 1977) 

1
1 Population Ecology 

I 

(Hannan & Freeman, 
1989) 

Purpose of Theory-The purpose of this 
theory is to: 

Explain how institutional forces shape 
organizations (DiMaggio & Powell, 1983; 
Meyer & Rowan, 1977) 

Explain the forces that shape the structures of 
organizations over long time spans, 
including how populations of firms forms 
arise and decline. Population ecology 
theory has specific implications for the 
nature of firms (Hannan & Freeman, 1989; 

Reason for Existence (=> I v. R) - Firms 
exist: 

Because they are isomorphic with institutions 
and are therefore legitimate organizations 
(DiMaggio & Powell, 1983) 

To produce and distribute resources (Hannan & 
Freeman, 1989: 5) 

Scale & Scope(=> B v. N)-Scale 
& Scope are determined by: 

The extent of coercive, memetic, and/ 
or normative isomorphism 
(DiMaggio & Powell, 1983) 

Inertial nature of firms, and the nature 
of the resource space, including the 
level of resource scarcity and the 
tightness of niche packing (Carroll 
&Hannan, 1989:411) 

II I Carroll & Hannan, 1989) I I I 
-~ I Real Entity (Metzger & 

Dalton, 1996) 

Resource-based (Barney, 
1991; Penrose, 1959; 
Wernerfelt, 1984) 

Strategic (Liebeskind, 
1996) 

To compare and contrast firms with humans in 
an attempt to depict legal and philosophical 
firm models (2001: 494) 

Analyze firms from the resource side rather 
than from the product side (Wernerfelt, 
1984: 171) 

To extend transaction-cost theory of the firm to 
incorporate knowledge in explaining the 
relationship between organization and 
competitive advantage (Liebeskind: 1996: 
93). 

To represent the moral authority of its 
members. Firms, however, are seen as 
naturally occurring beings with 
characteristics beyond those of its members. 
(2001: 496) 

Because the creation of new productive 
services requires the collection of resources 
that results in a firm (Penrose, 1959: 77, 85) 

To create isolating mechanisms (1996: 94). 
Firms are more capable of isolating and 
protecting knowledge (at lower transaction 
costs) than are markets. 

The outcome of its organization and 
management and activities (2001: 
496) 

The indivisibility of the resource 
bundles that must be collected to 
satisfy relevant demand for 
heterogeneous productive services 
(1959:67,68, 75, 77,83) 

The relative importance of knowledge 
components to a firm's strategy. If 
particular knowledge is critical, firms 
will expand their scope to bring the 
knowledge inside the firm, assuming the 
benefits exceed the costs (1996: 103). 

I~ 
I~ 
t-..J 

I
~ 
:::::::: 
:§ 
,;::s 



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Theory I Purpose of Theory-The purpose of this I Reason for Existence (:::::> I v. R) - Firms exist: I Scale & Scope(:::::> B v. N)- Scale & 
theory is to: Scope are determined by: 

B-Broad/ 
Incremental 

Behavioral Develop an empirically relevant, process-oriented, To form coalitions of individuals in order to attain collective Temporal or functional coalitions of 
I (Cyert & theory of economic decision making (Cyert & objectives (p.28) through decision-making processes participants formed to make decisions 

March, 1963) March, 1963: 3) which predicts firm behavior (1963: (1963: 290) (1963: 27) 
II 19) 

Game Theory To provide an alternative theory of the firm which To reduce the costs of communication and coordination of Qualitative changes in the reservoir of social 
(Kogut& accounts for ownership, incentives, and self-interest embedded social knowledge (1996: 503) knowledge available to economic agents 
Zander, (Kogut & Zander, 1996: 502). (1996: 503). 

11 1996) 

Resource Include the role of external control of organizations in I Because bridging and buffering mechanisms around a I The effectiveness of bridging and buffering 

01 
dependence organization theory (Pfeffer & Salancik, 1978) technological core create organization (Pfeffer & Salancik, mechanisms (Scott, 1987) 

00 I (Pfeffer & 1978: 106, 108; Scott, 1987: 182-198). 
! Salancik, 

1978) 
---
Stakeholder I Describe how organizations operate and to help predict I To fulfill some set of their various stakeholders' needs I The structuring and choice processes of the 

I~ (Brenner& organizational behavior (Brenner & Cochran, 1991: (Brenner & Cochran, 1991: 453) firm's management (Brenner & Cochran, Cochran, 452) 1991:455) 
1991) 

I 

II Transaction Generalize and extend transaction cost economic theory Because they are bundles of transactions which aggregate The size of the cumulated value networks 
Cognition to demonstrate how entrepreneurial cognitions because together they minimize transaction costs (2001: that must be assembled to serve 
(Mitchell, (planning, promise, and competition) create new 83) stakeholders at minimum transaction cost 
2001) value at multiple levels of analysis, through the (2001: 88) 

reduction of cross-level transaction costs (Mitchell, 
2001) 

I l""i 

Transaction Cost Explain why firms form as an alternative to the market To economize on transaction costs through substitution at the First-order economizing (Williamson, 1991) 
Economics (Coase, 1937) margin (Coase, 1937; Williamson, 1985) 
(Coase, 1937) 



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...... 
~ 

I Theory Purpose of Theory -The purpose of this theory is to: Reason for Existence(::::> Iv. R) - Firms exist: Scale & Scope(::::> B v. N) - Scale & Scope are 

C-Narrow/ 
Revolutio 

I narv 

determined by: 

Entrepreneuri Set out a general framework within which all the key questions in To improve coordination by structuring infonnation flow, which Factors supporting entrepreneurial insight, e.g., level of 
al the theory of the finn can be brought together at once requires that it be endowed with legal privileges, including infonnation synthesis (to make price and production 
(Casson, (Casson, 1996: 55) indefinite life (1996: 56) decisions), necessary sunk costs to permit necessary 
1996; customization, level of desire to appropriate the 
Witt, value of profit opportunities (Casson, 1996) 

i 1998) 

D-Broad/ 
Revolutio NONE NONE NONE 

I nary 

I 

Non-Theories 
of the Firm 

Competenc Set out a general form alternative to contractarian (e.g., Coase) NIA NIA 
e-based theories of the firm (Hodgeson, 1998: 25). Competence-
(Hodgso based theories are an omnibus grouping rather than a specific 
n, 

1998
) theory (Hodgeson, 1998) 

Computatio Present a framework for analyzing the information processing NI A: This theory assumes the existence of firms. A collection of information processing units (2002: 
nal (Barr (learning) behavior of firms, where firms are viewed as 345). Optimal firm size changes as the environment 
& artificial neural networks (Barr, 2002: 345). changes (2002: 346). 

Saraceno 
'2002) 

Economic Use business history, in particular the contractual choices made To bring together producers and investors in response to incomplete The attainment of sustained capabilities (1998: 70) 
Develop by 19"-century entrepreneurs to organize their businesses, to contracts and market power ( 1998: 70) 
ment reflect on the nature of the firm ( 1998: 66) 

(Lamore 
aux, 
1998) 

1@ 
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Theory Purpose of Theory - The purpose of this theory is 
to: 

Knowledge- Explain knowledge creation, sharing and transfer within 
Based a finn (Kogut & Zander, 1992: 383) 
(Kogut & 
Zander, 
1992) 

Managerial Describe a "new" organizational fonn characterized by 
(Bartlett & 'radical decentralization in the creation of self-
Ghoshal, contained units and frontline entrepreneurship 
1993) (Bartlett & Ghoshal 1993). 

Neoinstitution To provide an explanation of management decision 
al making where profit maximization is not cost-
(Furubotn, effective given transaction costs and bounded 
2001) rationalitv (Furubotn 2001: 143) 

~I 
Neoclassical Justify laissez-faire economics (Lerner, 1937: viii) with 

(Smith, respect to finn activity that is motivated by profit 
1937) seeking and is guided by an invisible hand (Smith, 

1937: 423). 

Political To define the role of outside ownership in minimizing 
(Muller & the risk of opportunistic behavior arising from 
Wameryd, imperfect fonnal enforcement (Muller & Wameryd, 
2001) 2001: 527) 

Property To predict the acquisition of assets by one finn from 
Rights another and to explain the costs and benefits of 
(Grossman integration (1986: 695). 
& Hart, 
1986) 

Resource- To suggest a theory that integrates constructs from 
learning resource-based, dynamic capabilities, and learning 
(Mahoney, theory (1995: 91). 
1995) 

Reason for Existence (~ I v. R) - Firms exist: 

Knowledge-based view does not explain why finns exist in 
lieu of opportunism or moral hazard (Foss, 1996) 

NI A: This theory assumes the existence of finns. 

To attain constrained profit maximization (2001: 151). 

It is only for the sake of profit that any man employs capital 
in the support of industry (Smith, 1937: 423). However, 
this is a theory of markets in which finns are important 
actors (Jensen & Meckling, 1976: 306); profit 
maximization is one of many goals or not a goal at all 
(Cvert & March 1963: 8) 

NIA: This theory assumes the existence offinns (2001: 527) 

NIA: This theory assumes the existence offinns (1986: 692) 

NI A: This theory assumes the existence of finns. 

Scale & Scope(~ B v. N) -Scale & Scope 
are determined by: 

What the finn makes and what it buys (1992: 
385) 

The clustering of roles amongst three distinct 
organizational groups (front-line, middle 
management, and top management) which 
work across decentralized units (1993: 41) 

NI A: Does not address finn boundaries. 

NI A: Neoclassical economics has no positive 
theory to determine the bounds of the finn 
(Coase, 1937; 1963: 15) 

NI A: Inside versus outside ownership is not 
associated with scale and scope. 

The assets owned by the finn ( 1986: 692) 

Bundles of unique resources (Mahoney, 1995) 

1g 
....... 
IOo