Birger Wernerfelt is an economist

Economist

An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

 and management theorist. He is the JC Penney Professor of Management and head of the Ph.D.

Ph.D.

A Ph.D. is a Doctor of Philosophy, an academic degree.Ph.D. may also refer to:* Ph.D. , a 1980s British group*Piled Higher and Deeper, a web comic strip*PhD: Phantasy Degree, a Korean comic series* PhD Docbook renderer, an XML renderer...

 program at the MIT Sloan School of Management

MIT Sloan School of Management

The MIT Sloan School of Management is the business school of the Massachusetts Institute of Technology, in Cambridge, Massachusetts....

.

Biography

A Danish

Denmark

Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...

 citizen, Wernerfelt has degrees from the University of Copenhagen

University of Copenhagen

The University of Copenhagen is the oldest and largest university and research institution in Denmark. Founded in 1479, it has more than 37,000 students, the majority of whom are female , and more than 7,000 employees. The university has several campuses located in and around Copenhagen, with the...

 and Harvard. Prior to coming to MIT in 1989, he was employed by the University of Copenhagen, the University of Michigan

University of Michigan

The University of Michigan is a public research university located in Ann Arbor, Michigan in the United States. It is the state's oldest university and the flagship campus of the University of Michigan...

 and Northwestern University

Northwestern University

Northwestern University is a private research university in Evanston and Chicago, Illinois, USA. Northwestern has eleven undergraduate, graduate, and professional schools offering 124 undergraduate degrees and 145 graduate and professional degrees....

. He is married to Harvard Professor Cynthia Montgomery.

Academic Contributions

Wernerfelt is best known for “A Resource-based View of the Firm” (1984), which is one of the most cited papers in the social sciences. Based on the premise that firms are heterogeneous, the article characterizes sustainable differences (resources), suggests that optimal competitive strategies are based on these resources, and describes how current resources can be used to develop new ones.
In the last several years, he has been working on implications and foundations of the “Adjustment-cost Theory of the Firm” (1997). The theory portrays the employment

Employment

Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...

 relationship as an attempt to exploit economies of scale

Economies of scale

Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...

in bargaining costs: The employer and the employee share the benefits of negotiating a single average price (wage) for a sequence of transactions instead of individual prices for each of them. The wedge in costs allows the parties to sustain an implicit contract with at-will options to fire and quit. The original article proposes that the scope of the firm be defined by the employment relationship. In later works, Wernerfelt has developed the theory to show that the employer should own most of the productive assets, that incentives are weaker inside firms, and that more information is communicated within than between firms.

Selected Articles

• “A Resource-based View of the Firm”, Strategic Management Journal 5, no. 2, April–June, pp. 171–180, 1984.
• “Tobin’s q and the Importance of Focus in Firm Performance”, (with Cynthia A. Montgomery), American Economic Review, 78, no. 1, March, pp. 246–50, 1988.
• “Diversification, Ricardian Rents, and Tobin’s q”, (with Cynthia A. Montgomery), RAND Journal of Economics, 19, no. 4, Winter, pp. 623–32, 1988.
• “Umbrella Branding as a Signal of New Product Quality: An Example of Signalling by Posting a Bond”, RAND Journal of Economics, 19, no. 3, Autumn, pp. 458–66, 1988.
• “General Equilibrium with Real Time Search in Labor and Product Markets”, Journal of Political Economy, 96, no. 3, August, pp. 821–31, 1988.
• “On the Nature and Scope of the Firm: An Adjustment-Cost Theory”, Journal of Business, 70, no. 4, October, pp. 489–514, 1997.
• “Why Should the Boss Own the Assets?”, Journal of Economics and Management Strategy, 11, no. 3, Fall, pp. 473–85, 2002.
• “Determinants of Asset Ownership: A Study of the Carpentry Trade” (with Duncan I. Simester), Review of Economics and Statistics, 87, no. 1, February, pp. 50–58, 2005.

External links

• Birger Wernerfelt’s homepage at MIT