Coordinating Changes in M-Form and U-Form Organizations

Abstract

We model the coordination of specialized tasks inside an organization as "attribute matching." Using this method, we compare organizational forms (U-form and M-form) in coordinating changes. In our framework, organizational forms affect the information structure of an organization and thus the way to coordinate changes. Compared to the U-form, the M-form organization achieves better coordination but suffers from higher costs due to a lack of scale economies or a lack of what we call "attribute compatibility." The distinctive advantage of the M-form is experimentation, which gives the organization more flexibility leading to more innovation and reform. Our theory applies to business firms, transition economies, and the organization of government. For transition economies, our theory relates the initial conditions of organizational differences with reform strategies, especially the "big-bang" approach in Eastern Europe and the "experimental" approach in China.