Blockchain technology and the theory of the firm

Where: Zoom Platform
Time: 2 p.m.

Please contact school.socialsciences [at] unitn.it for the link to the Zoom event.

Speaker

• Enrico Rossi, London School of Economics

Abstract

Blockchain technology has been widely regarded as an institutional technology, rather than a productive technology, as it represents the underlying infrastructure for the decentralised and autonomous coordination of distributed and pseudonymous actors acting non-cooperatively. By doing so, its protocol provides the institutional rules of conduct (in line with the “code is law” philosophy”). This characteristic distinguishes the blockchain from the standard technologies supporting cooperative peer production of online digital communities over the web 2.0. Moreover, the blockchain technology is an institutional technology also because it allows for the digital transmission and transaction of social claims (rights and value), which makes it radically different from the usual sharing of public goods over digital commons. For this reason, an increasing amount of works have emerged trying to understand how this new digital technology at the foundation of web 3.0 affects our understanding of the “economic institutions of capitalism”, especially the theories of contract and property.

An increasing amount of work has enquired the way in which blockchain technologies can potentially revolutionise our understanding of basic legal categories such as contracts (through the introduction of smart contracts) and property (through the introduction of programmable, or tokenized, property). Very little work has provided a comprehensive and systematic analysis of the implications of blockchain for the theory of the firm: is it true that blockchain technology can bypass firms and make them obsolete in practice, as some authors have suggested? What are the implications of blockchain technology for the theory of the firm in theory? This paper addresses these questions: it provides a detailed taxonomy to study blockchain technologies in function of the two dimensions of data access/use (consumption of consensus over the blockchain) and data manipulation/production (production of consensus), and highlights the way in which the different theories of the firm should be conceptualised and understood in function of this novel taxonomy. 

The paper shows that in the same way in which there is no single theory of the firm (but a multiplicity of theories of the firm depending on the specific perspective adopted), there is also no single blockchain technology (but a multiplicity of blockchains depending on the specific perspective adopted and topology implemented). The paper provides a mapping between the two; it discusses the way in which blockchain technology should be understood as an institutional technology in function of its different dimensions, and how different characteristics of the blockchain technology can replace or support different aspects and dimensions of firms, but never the whole institution of the firm in its entirety (for the simple reason that there is no single overarching theory of the firm). The main section of the paper provides a detailed discussion of the six different interpretations of the blockchain technology in function of the resulting six different theories of the firm: classical, neoclassical, Coasean, agency, adaptation/hold-up theories (transaction-cost economics), and investment theories (property-right theories).