Corporate Culture and the Nature of the Firm

In part, what sustains transaction cost and, more generally, contractarian approaches to the understanding of the firm is a particular view of social science. It is the reductionist view that phenomena have to be understood by breaking them down conceptually into smaller and smaller constitutive components: it is said that wholes should be explained in terms of their parts. In the social sciences, these injunctions typically take the form of an atomistic ontology and a challengeable methodological individualism (Hodgson, 1988). Yet it has been repeatedly asserted by philosophers, including Popper (e.g., Popper and Eccles, 1977, p. 18), that complete reductionism has never been achieved in any science. At least in economics, it is arguable that complete reductionism is not possible (Hodgson, 1993b; Udéhn, 1987).