chapter 4
....................................................................................................................................................ECONOMICS
AND HRM
....................................................................................................................................damian grimshaw
jill rubery
4.1 Introduction
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Thereis another class of questions which have been brought to the
forefront by recent theoretical work. One of these concerns the objectives
ofWrms, the reasons for their existence and the manner of their decision
taking. Each of these questions will require modes of analysis quite
diVerent from those which have dominated this century... When we
ask whyWrms exist we think of transaction costs and of increasing returns.
Neither is well understood and both, except for trivial cases, resist incorp
oration in traditional modes of analysis... As to aWrm’s organisation, we
know that ‘the entrepreneur’ will not do and the understanding will
require not only organisation, information and team theory but almost
surely social psychology and an account of historical development.
(Hahn 1991 :49 50)One of the leading protagonists of neoclassical economic theory, Frank Hahn, in
setting out his stall as to where economic theory and economics theorizing needs to
develop over the next century, prioritizes the theory of theWrm as the subject matter
and the development of interdisciplinary and historical perspectives as the
methodological challenge. Human resource management (HRM) is a core part of
the theory of theWrm; it is concerned primarily with how organizations manage the