The capability-based view of the firm is based on the assumption that firms know how to do things. Assuming the existence of a thing called `organizational knowledge', in the first part of the paper we identify its main building blocks and we provide a description of its inner structure. This...

1 An Overview of the Theory: Hierarchies, Social Contract and Reputation -- 2 Economic Theory and the Social Contract of the Firm -- 3 Games of Reputation and Compliance with the Social Contract -- 4 How Far Does Reputation Extend? Abuse of Authority and Corporate Culture -- 5 Information,...