Modeling Coordination in Organizations and Markets

Abstract

This paper describes a simple set of coordination structures that model certain kinds of information processing involved in organizations and markets. Four generic coordination structures are defined: product hierarchies, functional hierarchies, centralized markets, and decentralized markets. Then tradeoffs among these structures are analyzed in terms of production costs, coordination costs, and vulnerability costs. This model is unusual in that it includes detailed definitions of the structures at a micro-level and mathematical derivations of comparisons among them at a macro-level. In the final section of the paper, several connections are made between these formal results and previous work on organizational design.organizational structure, organization design, coordination, information processing