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Simplistic vs. Complex Organization: Markets, Hierarchies, and Networks in an Organizational Triangle — A Simple Heuristic to Analyze Real-World Organizational Forms —

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  • Wolfram Elsner
  • Gero Hocker
  • Henning Schwardt

Abstract

Transaction cost economics explains organizational forms in a market vs. hierarchy dichotomy as hybrids of those two ideal forms. The present paper, in contrast, argues that pure market and hierarchy, including their potential formal hybrids, are an empirically void set and that coordination forms have to be conceptualized in a fundamentally different way. A relevant organizational space must reflect the dilemma-prone direct interdependence in a complex world that either leads to (1) informally institutionalized, problem-solving cooperation (the instrumental dimension of institutionalization), or (2) mutual blockage, lock-in, and power- and status-based market and hierarchy failure (the ceremonial dimension of institutionalization). Institutionalized cooperation is established as a genuine organizational dimension that generates a third "attractor" in the new organizational space. Thus, an organizational triangle is constructed as a more realistic heuristic device for empirical organizational research. The Organizational Triangle is then tentatively applied in a couple of case studies.

Suggested Citation

  • Wolfram Elsner & Gero Hocker & Henning Schwardt, 2010. "Simplistic vs. Complex Organization: Markets, Hierarchies, and Networks in an Organizational Triangle — A Simple Heuristic to Analyze Real-World Organizational Forms —," Journal of Economic Issues, Taylor & Francis Journals, vol. 44(1), pages 1-30.
  • Handle: RePEc:mes:jeciss:v:44:y:2010:i:1:p:1-30
    DOI: 10.2753/JEI0021-3624440101
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    Cited by:

    1. Heinrich, Torsten, 2014. "Standard wars, tied standards, and network externality induced path dependence in the ICT sector," Technological Forecasting and Social Change, Elsevier, vol. 81(C), pages 309-320.
    2. Elsner, Wolfram & Schwardt, Henning, 2015. "The (dis-)embedded firm: Complex structure and dynamics in inter-firm relations. Adding institutionalization as a Veblenian dimension to the Coase-Williamson approach – An emerging triangular organiza," MPRA Paper 67193, University Library of Munich, Germany.
    3. Bing Ran & Scott Weller, 2021. "An Exit Strategy for the Definitional Elusiveness: A Three-Dimensional Framework for Social Entrepreneurship," Sustainability, MDPI, vol. 13(2), pages 1-15, January.

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