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The limits to designed orders: Authority under “distributed knowledge” conditions

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  • K. Foss

    ()

  • Nicolai Foss

Abstract

We examine the argument, put forward by modern management writers and, in a somewhat different guise by Austrian economists, that authority is not a viable mechanism of coordination in the presence of “distributed knowledge” We define authority and distributed knowledge and argue that authority is compatible with distributed knowledge. Moreover, it is not clear on theoretical grounds how distributed knowledge impacts on economic organization. An implication is that the Austrian argument that designed orders are strongly constrained by the Hayekian dispersed knowledge (Hayek, Kirzner, Sautet) is less decisive than it has usually been taken to be. The positive flipside of this argument is that Austrians confront an exciting research agenda in theorizing how distributed knowledge impacts economic organization. Copyright Springer Science + Business Media, LLC 2006

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Bibliographic Info

Article provided by Springer in its journal The Review of Austrian Economics.

Volume (Year): 19 (2006)
Issue (Month): 4 (December)
Pages: 261-274

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Handle: RePEc:kap:revaec:v:19:y:2006:i:4:p:261-274

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Web page: http://www.springerlink.com/link.asp?id=100335

Related research

Keywords: Knowledge; Designed orders; Distributed knowledge;

References

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  1. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
  2. Bolton, Patrick & Farrell, Joseph, 1990. "Decentralization, Duplication, and Delay," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 803-26, August.
  3. Radner, Roy, 2000. "Costly and Bounded Rationality in Individual and Team Decision-Making," Industrial and Corporate Change, Oxford University Press, vol. 9(4), pages 623-58, December.
  4. Minkler, Alanson P., 1993. "Knowledge and internal organization," Journal of Economic Behavior & Organization, Elsevier, vol. 21(1), pages 17-30, May.
  5. Langlois, Richard N & Foss, Nicolai J, 1999. "Capabilities and Governance: The Rebirth of Production in the Theory of Economic Organization," Kyklos, Wiley Blackwell, vol. 52(2), pages 201-18.
  6. Herbert A. Simon, 1991. "Organizations and Markets," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 25-44, Spring.
  7. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, September.
  8. Wang, Q. & von Tunzelmann, N., 2000. "Complexity and the functions of the firm: breadth and depth," Research Policy, Elsevier, vol. 29(7-8), pages 805-818, August.
  9. Nicolai J. Foss, 1999. "The Use of Knowledge in Firms," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(3), pages 458-, September.
  10. Kirsten Foss & Nicolai J. Foss, 2003. "Authority in the Context of Distributed Knowledge," DRUID Working Papers 03-08, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  11. Richardson, G B, 1972. "The Organisation of Industry," Economic Journal, Royal Economic Society, vol. 82(327), pages 883-96, September.
  12. Klein, Peter G, 1996. " Economic Calculation and the Limits of Organization," The Review of Austrian Economics, Springer, vol. 9(2), pages 3-28.
  13. Anna Grandori, 1997. "Governance Structures, Coordination Mechanisms and Cognitive Models," Journal of Management and Governance, Springer, vol. 1(1), pages 29-47, March.
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Cited by:
  1. Zhao, Liang & Zhu, Xian Chen, 2008. "An Explanation to Individual Knowledge and Behavior Based on Empirical Substrates," MPRA Paper 6825, University Library of Munich, Germany.
  2. Zhihong Mo, 2012. "Decentralized planning in a market economy? On the nature of Coase’s research program," The Review of Austrian Economics, Springer, vol. 25(2), pages 115-129, June.

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