Executive Discretion and Organizational Decision Making

The final link in the model of environment-organizational effects suggested that the administrator can affect decisions that direct the structure and activities of the organization. Presumably, such direction is to make the organization more consistent with the requirements of its environment. Thus, hospital administrators bring ideas for change, establishing elaborate inventory and cost accounting systems

Executive Recruitment and Interfirm Coordination

Thus far in this chapter we have described executive succession as a mechanism for organizational change, affected by the distribution of power within the organization and the organization s context and, in turn, affecting organizational designs and decisions. Another role served by executive succession is the integration of the organization with its environment and

A Resource Dependence Perspective

To survive, organizations require resources. Typically, acquiring resources means the organization must interact with others who control those resources. In that sense, organizations depend on their environments. Because the organization does not control the resources it needs, resource acquisition may be problematic and uncertain. Others who control resources may be undependable, particularly when resources

The Design and Management of Externally Controlled Organizations: Three Managerial Roles

In the first chapter, we indicated what a model of administration might look like using the theoretical perspective developed in this book. We return to the three roles introduced then to see what we have learned about the importance and use of those roles. The three roles of management—symbolic, responsive, and discretionary—differ in the way

Designing Externally Controlled Organizations

This is not a treatise on organizational design. However, some implications of the resource dependence perspective for design are worthy of consideration, if only because the adequacy and value of the perspective can be assessed. We will consider four implications: (1) the design of scanning systems; (2) designs for loosening dependencies; (3) designs for

Designing Organizational Environments

If organizational actions are responses to their environments, then the external perspective on organizational functioning argues strongly that organizational behavior is determined through the design of organizational environments. The focus for attempts to change organizations, it would appear, should be the context of the organizations. By changing the context, the behavior of the organizations

The Design and Management of Externally Controlled Organizations: Organizational Futures

The literature is littered with predictions about what future organizations will look like and how they will operate and be managed. The fact that most of these predictions have not been realized is, we believe, a consequence of the inadequate theoretical base underlying them. We would like to conclude our exposition of the resource

The economic theory of organizations: what it is

The economic theory of organizations as a field of study includes (1) the theory and policy of industrial organization; (2) the theory of the firm; (3) the theory of contracts; and (4) extension of these to theories of markets, governments, and nonprofit organizations. I briefly review the first three of these on the way to

The economic theory of organizations: what it isn’t

The economic theory of organizations, as any field, is subject to limita- tions. First, at its present stage of development, the economic theory of organizations is less a theory of organizations than it is a theory of the firm. Second, the economic theory of organizations includes analysis of decisions. However, in this area the

Efficient Decisions in Organizations: Efficiency criteria

In the economic analysis of organizations, managerial decisions in an organization are efficient when these decisions maximize net benefits to the organization (that is, net private benefits). These privately efficient decisions are said to be socially efficient when they also maximize net benefits to society (that is, net social benefits). In the typical analysis

Efficient Decisions in Organizations: Evaluation of assumptions

Although the model of economically efficient markets is  flexible enough to predict decision outcomes in alternative organizational forms under the restrictive conditions stated above, it is clearly limited in a number of significant ways. First, as formulated, the model cannot distinguish between the market and specific organizations that operate within the exchange market. The

Efficient Decisions in Organizations: Bounded rationality

The assumption of unbounded rationality in the model of efficient mar- kets is important enough to warrant a separate discussion. Unbounded rationality requires that all decision makers are fully informed and are able to fully process all relevant information so as to optimize their respective positions. They know their options and also the options

Efficient Decisions in Organizations: Organizations as social constructs

For-profit  corporations,  public  bureaus,  and  nonprofit  organizations are complex and bureaucratic organizations as defined by Thompson (1961, p. 8): ‘Organization theory attempts to account for order in behavior. A bureaucratic organization is a structure composed of authority, status,  technical,  and  social  relationships.’  An  organization is not only a construct of efficiency; it is also 

Theory of property rights

The theory of property rights has three parts. First, the concept of a property right is defined. Second, alternative systems of property rights are delineated. Third, the assignment of rights under different property rights systems is examined for the implications for efficiency of resource use. In the theory of property rights, the definition of

Property rights and incentives in organizations

Property rights systems are clearly important to decisions of individu- als and of organizations concerning investment in and exchange of resources. Property rights that include the right to control a resource and the right to obtain the return from a resource provide a basis for efficient use of resources when the holder of the

Property rights and the firm: the issue of separation of ownership and control

Theories of the firm  based  on  property  rights  have  been  the  focus of much research in the economics  of  organization,  both  explicitly and implicitly. These theoretical interpretations of the firm are varied, however. The explicit concerns primarily examined in this literature are transactions costs, contractual relationships in general, and the principal–agent relationship in particular.

Unbounded rationality, property rights, and managerial decision making

These developments provide support for managerial theories such as the theories that follow Williamson (1963) which assume that managers have their own objective of utility maximization, subject to a minimum profit constraint that will satisfy shareholders.  In  Williamson’s  model this is the reported profit level (πR). If πR is acceptable to shareholders, then πR

Bounded rationality, property rights, and managerial decision making

Separation of ownership and control is inherent in the corporate orga- nizational form. This situation exists even in the face of limitations on the abilities of owners (shareholders) and those in control (managers) to process information and articulate and achieve their respective goals. The property rights model and the transactions cost, contracts, and principal–agent

Property rights, incentives, and managerial decision making

Separation of ownership and control means that resource investment decisions in corporations are not made by the holders of capital. The effect of this is that the corporate market is no longer efficient. Traditionally, solutions to the principal–agent problem that is inherent in the separation issue have been proposals to redesign contracts and organizational

Property rights in the public sector

As with theories of the firm, many theories of public sector organiza- tions have been based on property rights, either explicitly or implicitly. These theories tend to examine the concept of authority rather than ownership. Although authority and ownership are not the same, they are related. Whereas ownership implies a legal right of possession,