Starts with some general comments on the fuzziness of theoretical concepts that point to real phenomena and defends the view that the firm may be understood as a social entity, rather than a nexus of contracts among individuals. The firm uses several mechanisms of control at once: authority, rewards, and duty. These mechanisms relate to each other and support each other. The productivity of the firm is brought about by this type of tight alignment that builds on the same cognitive, behavioural, and emotional tendencies that shape custom.
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