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Division of Labor, Organizational Coordination and Market Mechanism in Collective Problem-Solving

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Author Info
Luigi Marengo
Giovanni Dosi

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Abstract

This paper builds upon a view of economic system and individual economic organization as problem-solving arrangements and presents a simple model of adaptive problem-solving driven by trial-and-error and collective selection. The institutional structure, and in particular its degree of decentralization, determines which solutions are tried out and undergo selection. It is shown that if the design problem at hand is complex (in term of interdependencies between the elements of the system) then a decentralized institutional structure is very unlikely to ever generate optimal solutions and therefore no selection process can ever select them. We also show that nearly-decomposable structures have in general a selective advantage in terms of speed in reaching good locally optimal solutions.

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Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2003/04.

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Date of creation: 06 Dec 2003
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Handle: RePEc:ssa:lemwps:2003/04

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Related research
Keywords: Theory of the firm; Vertical and horizontal integration; Computational complexity;

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This paper has been announced in the following NEP Reports: This item is featured on the following reading lists:
  1. Industrial Sociology (FCT-UNL)
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December. [Downloadable!] (restricted)
    Other versions:
  2. Becker, G.S. & Murphy, K.M., 1991. "The Division of Labor, Coordination Costs, and Knowledge," University of Chicago - Economics Research Center 92-5, Chicago - Economics Research Center.
    Other versions:
  3. Klepper, Steven, 1997. "Industry Life Cycles," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 145-81.
  4. Scott E. Page, 1996. "Two measures of difficulty (*)," Economic Theory, Springer, vol. 8(2), pages 321-346.
  5. Page, Scott E, 1996. "Two Measures of Difficulty," Economic Theory, Springer, vol. 8(2), pages 321-46, August.
  6. Riordan, Michael H. & Williamson, Oliver E., 1985. "Asset specificity and economic organization," International Journal of Industrial Organization, Elsevier, vol. 3(4), pages 365-378, December. [Downloadable!] (restricted)
  7. Herbert A. Simon, 2002. "Near decomposability and the speed of evolution," Industrial and Corporate Change, Oxford University Press, vol. 11(3), pages 587-599, June.
  8. Paul David & Edward Steinmueller, 2003. "Introduction," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 12(1), pages 1-3, January. [Downloadable!] (restricted)
  9. Loasby, Brian J., 1998. "The organisation of capabilities," Journal of Economic Behavior & Organization, Elsevier, vol. 35(2), pages 139-160, April. [Downloadable!] (restricted)
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  10. Dow, Gregory K., 1987. "The function of authority in transaction cost economics," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 13-38, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Tommaso Ciarli & Riccardo Leoncini & Sandro Montresor & Marco Valente, 2008. "Technological change and the vertical organization of industries," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 367-387, August. [Downloadable!] (restricted)
  2. Kerstin Wolter, 2005. "Divide and Conquer? Decentralisation, Co-ordination and Cluster Survival," DRUID Working Papers 05-12, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
  3. Stefano Brusoni & Luigi Marengo & Andrea Prencipe & Marco Valente, 2004. "The Value and Costs of Modularity: A Cognitive Perspective," SPRU Electronic Working Paper Series 123, University of Sussex, SPRU - Science and Technology Policy Research. [Downloadable!]
  4. Luigi Marengo & Corrado Pasquali & Marco Valente & Giovanni Dosi, 2009. "Appropriability, Patents, and Rates of Innovation in Complex Products Industries," LEM Papers Series 2009/05, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
  5. Giovanni Dosi & Marco Grazzi, 2005. "Technology as Problem-Solving Procedures and Technology as Input-Output Relations: Some Perspectives on the Theory of Production," LEM Papers Series 2005/26, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
  6. Leonardo Bargigli, 2005. "An evolutionary model for the dynamics of vertical integration and network-based production," Industrial Organization 0509002, EconWPA. [Downloadable!]
  7. Massimiliano Mazzanti & Susanna Mancinelli, 2007. "SME Performance, Innovation and Networking Evidence on Complementarities for a Local Economic System," Working Papers 2007.50, Fondazione Eni Enrico Mattei. [Downloadable!]
  8. Leonardo Bargigli, 2005. "The limits of modularity in innovation and production," CESPRI Working Papers 176, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Sep 2005. [Downloadable!]
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