Simplistic vs. Complex Organization: Markets, Hierarchies, and Networks in an 'Organizational Triangle'

Transaction cost economics explains organizations in a simplistic ‘market-vs.-hierarchy’ dichotomy. In this view, complex real-world coordination forms are simply considered ‘hybrids’ of those ‘pure’ and ideal forms, thus being located on a one-dimensional ‘line’ between them. This ‘organizational dichotomy’ is mainly based on relative marginal transaction costs, relative lengths of value-added chains, and ‘rational choice’ of coordination form. The present paper, in contrast, argues that pure ‘market’ and ‘hierarchy’, even including their potential hybrids, are a theoretically untenable and empirically void set. Coordination forms, it is argued, have to be conceptualized in a fundamentally different way. A relevant ‘organizational space’ must reflect the dimensions of a complex world such as dilemma-prone direct interdependence, resulting in strong strategic uncertainty, mutual externalities, collectivities, and subsequent emergent process. This, in turn, will lead either to (1) informally institutionalized, problem-solving cooperation (the instrumental dimension of the institution) or (2) mutual blockage, lock-in on an inferior path, or power- and status-based market and hierarchy failure (the ceremonial dimension of the institution). This paper establishes emergent instrumental institutionalized cooperation as a genuine organizational dimension which generates a third ‘attractor’ besides ‘market’ and ‘hierarchy’, i.e., informal network. In this way, an ‘organizational triangle’ can be generated which may serve as a more relevant heuristic device for empirical organizational research. Its ideal corners and some ideal hybrids on its edges (such as ideal clusters and ideal hub&spoke networks) still remain empirically void, but its inner space becomes empirically relevant and accessible. The ‘Organizational Triangle’ is tentatively applied (besides casual reference to corporate behavior that has lead to the current financial meltdown), by way of a set of criteria for instrumental problem-solving and a simple formal algorithm, to the cases of the supplier network of ‘DaimlerChrysler US International’ at Tuscaloosa, AL, the open-source network Linux, and the web-platforms Wikipedia and ‘Open-Source Car’. It is considered to properly reflect what is generally theorized in evolutionary-institutional economics of organizations and the firm and might offer some insight for the coming industrial reconstructions of the car and other industries.Market vs. Hierarchy; Transaction Costs; Complexity; Institutionalization; Network Formation; Hub&Spoke Supplier Networks; Open-Source Networks

Public Congestion Network Situations, and Related Games

This paper analyzes congestion effects on network situations from a cooperative game theoretic perspective. In network situations players have to connect themselves to a source. Since we consider publicly available networks any group of players is allowed to use the entire network to establish their connection. We deal with the problem of finding an optimal network, the main focus of this paper is however to discuss the arising cost allocation problem. For this we introduce two different transferable utility cost games. For concave cost functions we use the direct cost game, where coalition costs are based on what a coalition can do in absence of other players. This paper however mainly discusses network situations with convex cost functions, which are analyzed by the use of the marginal cost game. In this game the cost of a coalition is defined as the additional cost it induces when it joins the complementary group of players. We prove that this game is concave. Furthermore, we define a cost allocation by means of three egalitarian principles, and show that this allocation is an element of the core of the marginal cost game. These results are extended to a class of continuous network situations and associated games.Congestion;network situations;cooperative games;public

Multimodal hub location and hub network design

Cataloged from PDF version of article.Through observations from real life hub networks, we introduce the multimodal hub location and hub network design problem. We approach the hub location problem from a network design perspective. In addition to the location and allocation decisions, we also study the decision on how the hub networks with different possible transportation modes must be designed. In this multimodal hub location and hub network design problem, we jointly consider transportation costs and travel times, which are studied separately in most hub location problems presented in the literature. We allow different transportation modes between hubs and different types of service time promises between origin–destination pairs while designing the hub network in the multimodal problem. We first propose a linear mixed integer programming model for this problem and then derive variants of the problem that might arise in certain applications. The models are enhanced via a set of effective valid inequalities and an efficient heuristic is developed. Computational analyses are presented on the various instances from the Turkish network and CAB data set

Optimization of Hybrid Hub-and-Spoke Network Operation for Less-Than-Truckload Freight Transportation considering Incremental Quantity Discount

This paper presents a mixed integer linear programming model (MILP) for optimizing the hybrid hub-and-spoke network operation for a less-than-truckload transportation service. The model aims to minimize the total operation costs (transportation cost and transfer cost), given the determined demand matrix, truck load capacity, and uncapacitated road transportation. The model also incorporates an incremental quantity discount function to solve the reversal of the total cost and the total demand. The model is applied to a real case of a Chinese transportation company engaged in nationwide freight transportation. The numerical example shows that, with uncapacitated road transportation, the total costs and the total vehicle trips of the hybrid hub-and-spoke network operation are, respectively, 8.0% and 15.3% less than those of the pure hub-and-spoke network operation, and the assumed capacity constraints in an extension model result in more target costs on the hybrid hub-and-spoke network. The two models can be used to support the decision making in network operations by transportation and logistics companies

One-way and two-way cost allocation in hub network problems

We consider a cost allocation problem arising from a hub network problem design. Finding an optimal hub network is NP-hard, so we start with a hub network that could be optimal or not. Our main objective is to divide the cost of such network among the nodes. We consider two cases. In the one-way flow case, we assume that the cost paid by a set of nodes depends only on the flow they send to other nodes (including nodes outside the set), but not on the flow they receive from nodes outside. In the two-way flow case, we assume that the cost paid by a set of nodes depends on the flow they send to other nodes(including nodes outside the set) and also on the flow they receive from nodes outside. In both cases, we study the core and the Shapley value of the corresponding cost game

The design of single allocation incomplete hub networks

Cataloged from PDF version of article.The hub location problem deals with finding the location of hub facilities and allocating the demand nodes to these hub facilities so as to effectively route the demand between any origin–destination pair. In the extensive literature on this challenging network design problem, it has widely been assumed that the subgraph induced by the hub nodes is complete. Relaxation of this basic assumption constitutes the starting point of the present work. In this study, we provide a uniform modeling treatment to all the single allocation variants of the existing hub location problems, under the incomplete hub network design. No network structure other than connectivity is imposed on the induced hub network. Within this context, the single allocation incomplete p-hub median, the incomplete hub location with fixed costs, the incomplete hub covering, and the incomplete p-hub center network design problems are defined, and efficient mathematical formulations for these problems with Oðn3Þ variables are introduced. Computational analyses with these formulations are presented on the various instances of the CAB data set and on the Turkish network. 2009 Elsevier Ltd. All rights reserved

Hub location with congestion and time-sensitive demand

This work studies the effect of hub congestion and time-sensitive demand on a hub-and-spoke location/allocation system. The Hub Location with Congestion and Time-sensitive Demand Problem is introduced, which combines these two main characteristics. On the one hand, hubs can be activated at several service levels, each of them characterized by a maximum capacity, expressed as the amount of flow that may circulate through the hub, which is associated with a hub transit time. On the other hand, alternative levels are available for served commodities, where each demand level is characterized by its amount of demand, unit revenue, and maximum service time. In this problem the efficiency of a hub-and-spoke system is given by the maximum net profit it may produce. To the best of our knowledge this is the first work where hub congestion and time-sensitive demand are jointly considered. Two alternative mixed-integer linear programming formulations are proposed. They include a new set of constraints, which are necessary to guarantee the consistency of the obtained solutions under the presence of the capacity-type constraints derived from hub service levels and served demand levels. The efficiency of the formulations is analyzed through a set of computational experiments. The results of the computational experiments allow to study the structure of the obtained solutions and to analyze how the different parameters affect them