Institute for Development Studies, University of Nairobi

In this paper we develope a framework in which organisation is treated as an input in a production firm. The determination of an equilibrium organisation input is described. Corresponding to the equilibrium, a quasi-rent is earned by the organisation. Improvements in efficiency and technological change are regarded as substitution of organisation input for labour and capital inputs. Development sequences of three types of firms are discussed. For the large firm in a mature economy, organisation input is primarily generated within the firm. For the small firm in a mature economy, entry and exit play the vital role. For the firm in an underdeveloped country little organisation input is generated, and there are good economic reasons why the substitution of organisation input for other inputs is inefficient. It is a better strategy for an underdeveloped country to import organisation inputs (but not organisation stocks) when they are needed, because of the relatively low costs of organisation inputs generated in the mature economies.