The New Governance Paradigm for Firms based on Institutions

Abstract

One of the most important problems of modern management in large corporations as well as small- and medium-sized firms is the lack of effective tools that allow building a management system that would ensure the self-development of the firm. This article is devoted to the approach that assists in that self-development. The approach is based on the analysis of the firm as an institutional system, in which some specific elements (institutions and routines) are distinguished, with the help of which the management is carried out. A manager in this kind of firm should not be an administrator of agents, but an institutional entrepreneur who carries out the process of “creative destruction” at the level of organizational routines in the company. The basis of such management is the principle of proportionality of the three institutions forming the firm - the institutions of force, assistance, and self-interest. By ensuring the proportionality of these institutions in the firm, the manager can create a harmonious corporation. Particular attention is paid to the specific forms of manifestation of elements of institutional structure in corporations and these patterns.