Understanding Leadership A Coordination Theory

Important aspects of leadership behavior can be rendered intelligible through a focus on coordination games. The concept of common knowledge is shown to be particularly important to understanding leadership. Thus, leaders may establish common knowledge conditions and assist the coordination of strategies in this way, or make decisions in situations where coordination problems persist in spite of common knowledge.Game theory, management, organization

Firms, Incomplete Contracts and Organizational Learning

This explorative paper argues that the central problem of economic organization is adaptation to unforeseen contingencies. However, flexibility is a rather neglected issue in the theory of economic organization. This contrasts with much organization theory, in which the seeking and processing of information about the organization's key uncertainties is seen as a determinant of organizational form. The notion of incomplete contracts is argued to provide a means to bridging ideas from organizational economics and organization theory, particularly organizational learning. Incomplete contracts are not only important because they provide room for incentive problems, but more importantly because they allow firms to exploit processes of organizational learning that must always involve some unforeseen contingencies. Firms are seen as efficient institutional responses to learning processes that involve strongly complementary problem-solving activities.The theory of economic organization, incomplete firm contracts, organizational learning, t

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

Towards a Model of Designing an Organizational Structure in a Knowledge Based Society

The role of the manager in the knowledge society is to lead, in a productive and cost effective manner, a system that is at the crossroads of three worlds: the environment, the human and the organization. To ensure the continuity of the organization, the manager must choose an appropriate structure that would enable it to increase productivity, improve quality of goods and maintain the motivation, satisfaction and involvement of the human factor. Changes promoted by the influences of organizational theories and knowledge management have resulted in reducing the emergence of hierarchical levels, formal control, in a low degree of formalization in general and in the emergence of deconstructed forms. The concept of organizational design is promoted by structuring the organization and seeks to ensure consistency among strategy, structure and incentive systems of the organization, an idea which also represents the basis of the organizational perspective imposed by Mintzberg(1990). This paper builds upon the three main theories that have influenced the design of organizational structure and proposes an integrated model that takes into account the changes promoted by knowledge management and aims at satisfying human resources quantification.structure, organizational design, knowledge management, contingency, model, approach

Mechanism design for single leader Stackelberg problems and application to procurement auction design

In this paper, we focus on mechanism design for single leader Stackelberg problems, which are a special case of hierarchical decision making problems in which a distinguished agent, known as the leader, makes the first move and this action is followed by the actions of the remaining agents, which are known as the followers. These problems are also known as single leader rest follower (SLRF) problems. There are many examples of such problems in the areas of electronic commerce, supply chain management, manufacturing systems, distributed computing, transportation networks, and multiagent systems. The game induced among the agents for these problems is a Bayesian Stackelberg game, which is more general than a Bayesian game. For this reason, classical mechanism design, which is based on Bayesian games, cannot be applied as is for solving SLRF mechanism design problems. In this paper, we extend classical mechanism design theory to the specific setting of SLRF problems. As a significant application of the theory developed, we explore two examples from the domain of electronic commerce-first-price and second-price electronic procurement auctions with reserve prices. Using an SLRF model for these auctions, we derive certain key results using the SLRF mechanism design framework developed in this paper. The theory developed has many promising applications in modeling and solving emerging game theoretic problems in engineering

A Socially-Aware Incentive Mechanism for Mobile Crowdsensing Service Market

Mobile Crowdsensing has shown a great potential to address large-scale problems by allocating sensing tasks to pervasive Mobile Users (MUs). The MUs will participate in a Crowdsensing platform if they can receive satisfactory reward. In this paper, in order to effectively and efficiently recruit sufficient MUs, i.e., participants, we investigate an optimal reward mechanism of the monopoly Crowdsensing Service Provider (CSP). We model the rewarding and participating as a two-stage game, and analyze the MUs' participation level and the CSP's optimal reward mechanism using backward induction. At the same time, the reward is designed taking the underlying social network effects amid the mobile social network into account, for motivating the participants. Namely, one MU will obtain additional benefits from information contributed or shared by local neighbours in social networks. We derive the analytical expressions for the discriminatory reward as well as uniform reward with complete information, and approximations of reward incentive with incomplete information. Performance evaluation reveals that the network effects tremendously stimulate higher mobile participation level and greater revenue of the CSP. In addition, the discriminatory reward enables the CSP to extract greater surplus from this Crowdsensing service market.Comment: 7 pages, accepted by IEEE Globecom'1

Foundational Economic Theories for Political-Scientific Inter-Branch Studies

Economic theories are increasingly popular in political science, and in particular in research on the relations between the legislative, the executive, and the judicial branches of government. Among these theories, principal-agent (´PA´) and transaction cost economics (´TCE´) feature particularly high in our research agenda. Yet, pushed by the view that "the content of ´science´ is primarily the methods and rules" (King et al. 1994: 9), and working with limited resources, political scientists have tended to neglect careful theorizing. PA and TCE are taken off-the-shelf without much prior scrutiny, and past conceptual mistakes are perpetuated. This paper aims at introducing and explaining the real PA, positive agency, TCE, and incomplete contracts theories for the purposes of political analysis. In a companion paper, I show the serious mistakes perpetuated by political scientists, and I argue that, faced with a choice between those four economic theories, we should place our bets on a revised version of TCE.Theory of delegation, political science, principal-agent models, transaction costs economics

Selective Intervention and Internal HybridsInterpreting and Learning from the Rise and Decline of the Oticon Spaghetti Organization

Infusing hierarchies with elements of market control has become a much-used way of simultaneously increasing entrepreneurialism and motivation in firms. However, this paper argues that such “internal hybrids,” particularly in their radical forms, are inherently hard to successfully design and implement, because of fundamental credibility problems related to managerial promises to not intervene in delegated decision-making ¾ an incentive problem that is often referred to as the “problem of selective intervention.” This theoretical theme is developed and illustrated, using the case of the world-leading Danish hearing aids producer, Oticon. In the beginning of the 1990s, Oticon became famous for its radical internal hybrid, the ”spaghetti organization.” Recent work has interpreted the spaghetti organization as a radical attempt to foster dynamic capabilities by imposing loose coupling on the organization, neglecting, however, that about a decade later, the spaghetti organization has given way to a more traditional matrix organization. This paper presents an organizational economics interpretation of organizational changes in Oticon, and argues that a strong liability of the spaghetti organization was the above incentive problem. Motivation in Oticon was strongly harmed by selective intervention on the part of top-management Changing the organizational structure was one means of repairing these motivational problems. Refutable implications are developed, both for the understanding of efficient design of internal hybrids, and for the more general issue of the distinction between firms and markets, as well as the choice between internal and external hybrids.Internal hybrids, organizational change, delegation, managerial commitment problems, new organizational forms