Capturing Knightian Advantages of Large Business Organizations Through Group Decision-Making Processes

John Howard Finch, Nicola Cumming Naughton

Research output: Contribution to journalArticle

Abstract

This paper develops an explanation of how large business organisations may achieve advantages of size by virtue of decision-making procedures. The argument is inspired by Knight's (Risk, Uncertainty and Profit, NewYork: Houghton Mifflin, 1921) model of internal business organisation, together with his explanation of profits pertaining to large business organisations by being connected with situations that he characterises as uncertain rather than risky. Capturing the decision-making advantages is fairly straightforward in Knight's explanation. Decision making is internalised to individuals who cope with uncertain situations— beyond the range of normal experience— in a manner consistent with managerial/entrepreneurial vision. Recent organisation theory has drawn attention to the use of groups as an integral part of decision making within large business organisations and this has important implications for economics. This paper highlights the role of groups in achieving Knightian advantages. The argument loosens the identification of organisation with a managerial/entrepreneurial vision, adding different levels and types of deliberate and automatic selection, the alignment of which is likely to be problematic.
Original languageEnglish
Pages (from-to)379-403
Number of pages24
JournalInternational Journal of the Economics of Business
Volume8
Issue number3
DOIs
Publication statusPublished - 2001

Keywords

  • decision making
  • uncertainty
  • large business organisations
  • Frank Knight
  • capabilities
  • shared mental models

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