Week 9 Flashcards
Author: Coase
Year: 1937
Coase examines the assumptions underlying economic theory regarding firms. He argues that firms exist to reduce the costs associated with using the price mechanism. The entrepreneur coordinates production within firms, contrasting with market transactions. The emergence of firms is linked to the need for efficient organization in a specialized economy.
Coase highlights the relationship between uncertainty, management, and the size of firms, suggesting that firms grow until the costs of organizing transactions equal market costs.
Author: Burns & Stalker
Year: 1961
Mechanistic Systems: Suitable for stable conditions, characterized by specialized tasks, hierarchical control, and vertical communication. Organic Systems: Suitable for dynamic environments, emphasizing collaboration, flexible roles, and lateral communication. Both systems represent a spectrum rather than a strict dichotomy, with organizations often exhibiting traits of both.
Author: Burton & Obel
Year: 1998
Technology influences organizational design dimensions: formalization, centralization, complexity, configuration, coordination, and control.
“technology” is considered a “contingency factor” meaning that the specific type of technology an organization uses significantly impacts the optimal organizational structure and design, and needs to be aligned with other factors like environment, strategy, and size to achieve effectiveness; essentially, there’s no “one size fits all” approach, and the best organizational structure depends on the technology used
Higher technology routineness leads to increased formalization and predictability. Professionalism mitigates the impact of routineness on formalization.
Author: Jensen & Meckling
Year: 1976
Theory of the Firm: Explores ownership structure, agency costs, and managerial behavior. Agency Costs: Defined as monitoring expenditures, bonding expenditures, and residual loss due to misalignment of interests between principals and agents. Property Rights: Essential for determining cost and reward allocation within organizations. Transaction Cost Economics: Focuses on minimizing transaction costs through efficient governance structures. Corporate Structure: Examines the implications of ownership separation and the role of contracts in organizational behavior.
Author: Rubin
Year: 1990
Rubin starts this analysis based on two principles: People are self-interested and opportunistic, and Writing complete contracts that account for all possible events and eliminate all forms of opportunism or cheating is impossible. People are opportunistic and will attempt to take a lot for themselves in any business transaction. These two principles imply that there will be various forms of opportunism in transactions.
Author: Ostrom
Year: 1990
She argues that communities can effectively manage shared resources (like forests, fisheries, or irrigation systems) through self-organized institutions and rules, challenging the traditional “Tragedy of the Commons” idea that such resources will always be overexploited without centralized control. Ostrom emphasizes the importance of local communities creating and enforcing their own rules for managing common resources, as they have the most intimate knowledge of the resource and its needs. Ostrom identifies key principles that contribute to sustainable resource management, including clearly defined boundaries, participation of users in decision-making, monitoring and sanctioning mechanisms, and conflict resolution processes.
Author: Williamson
Year: 1981
outlines the theory of “Transaction Cost Economics” (TCE), explaining how organizations choose their governance structures based on minimizing the costs associated with economic exchanges (transactions) between parties, considering factors like asset specificity, uncertainty, and opportunism. Unlike traditional economic theory which focuses on production, TCE considers the transaction as the fundamental unit of analysis, examining the costs involved in negotiating, monitoring, and enforcing contracts between parties.
Author: Mintzberg
Year:1980
Proposes a framework for understanding organizational structures by identifying five primary configurations: Simple Structure, Machine Bureaucracy, Professional Bureaucracy, Divisionalized Form, and Adhocracy, suggesting that effective organizations tend to cluster their design elements into one of these configurations depending on their environment and strategy. The core idea is that most organizations can be categorized into one of five structural types, each with distinct characteristics based on how work is divided and coordinated.
Author: Blau & Scott
Year: 1962
Refers to a social structure deliberately designed to achieve specific goals through established rules, hierarchical relationships, and clearly defined roles, where the primary characteristic is a conscious effort to coordinate activities towards a planned outcome, unlike informal social groups that emerge organically. Formal organizations are intentionally created with a set of goals in mind, with structures and procedures designed to efficiently reach those goals. A distinct power structure exists within a formal organization, where authority is delegated through different levels of leadership.
