Organizational economics and institutions as missing elements in economic development analysis

The main objective of this paper is to apply X-efficiency theory to the analysis of organizations and state enterprises with special reference to developing countries. In particular, the black box relating to the internal operation of organizations is opened up to understand better the decision mechanisms operating within firms and institutions. Intrafirm conventions are explored as they relate to the impact of external and internal pressures on the decision-making process. Implications are drawn to improve the internal efficiency of institutions in developing countries.