Learning Objectives
By the end of this section, you will be able to:
- Situate businesses and their business models within their market governance structures
- Define infrastructure, corporate governance, and market governance
The previous sections dealt mainly with the nature of the modern business enterprise as an individual organization. But, of course, no business is created in a vacuum, and no business can operate in complete isolation. This section will look at the economic, social, and political nature of markets to better understand how real businesses fit into a heterodox understanding of the economy.
Any business model–including those discussed above and beyond–is a plan for how to successfully operate a business within one or more markets. A good business plan will have to consider, among other things, the competition, the potential customer base, rules and regulations, and the necessary infrastructure to produce and distribute the product, whatever it may be. Established businesses will have worked out their business models over time, will have built (or had built for them) the necessary infrastructure (for instance, roads or communications protocols), and will typically have helped define the rules and regulations that dictate which individual and competitive activities are permissible and which are not. This is to say that markets themselves are defined by (and the way business enterprises behave in these markets is guided by) their infrastructure and their corporate and market governance structures.
Definitions
Infrastructure: the common structures, facilities, and systems necessary for organizations to operate. These may include physical infrastructure like highways, bridges, electrical grids, and sewage systems; as well as systems like the complex networks of computers tied together through communications lines and protocols we know as the internet.
Corporate governance: the rules and practices defining how and by whom a business is directed as well as how members of the business will interact with each other and those outside of the business. These are both formal rules like accounting practices or the corporate hierarchy of who reports to whom, as well as informal norms, traditions, and relationships.
Market governance: the rules and practices defining how business enterprises will behave in a market, including especially how they will interact with their competitors. These may include formal agreements–for instance, a consent decree by which a business agrees not to engage in an activity the government considers anticompetitive, or a joint venture operation between two energy companies to explore a potential source of crude oil. Probably more important, though, are the various informal arrangements by which certain types of competition and cooperation between businesses are allowed while others are not.
A side note: these shared rules and infrastructure are not fixed in time–they evolve, whether by unintended consequence or in