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Coordinating Changes in M-form and U-form Organizations

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  • Yingyi Qian
  • Gerard Roland
  • Chenggang Xu

Abstract

We introduce a method of modelling coordination inside an organization as a process of "attribute matching." Using this method, we compare organizational forms (U-form and M-form) in coordinating changes. In our model, 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 M-form has a distinctive advantage in carrying out experimentation which gives the organization more flexibility leading to more innovation and reform. We apply our theory to business firms, transition economies, and the organization of government (especially federalism). In the case of 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.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 284.

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Length: pages
Date of creation: 01 May 1999
Date of revision:
Handle: RePEc:wdi:papers:1999-284

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Keywords: organization; M-form; U-form; innovation; transition; organization of government; experimentation;

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References

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  1. Gary S. Becker & Kevin M. Murphy, 1994. "The Division of Labor, Coordination Costs, and Knowledge," NBER Chapters, National Bureau of Economic Research, Inc, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 299-322 National Bureau of Economic Research, Inc.
  2. M. L. Weitzman, 1973. "Prices vs. Quantities," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 106, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Eric Maskin & Yingyi Qian & Chenggang Xu, 1997. "Incentives, Information, and Organizational Form," Working Papers, Stanford University, Department of Economics 97034, Stanford University, Department of Economics.
  4. Roland, Gérard & Verdier, Thierry, 1997. "Transition and the Output Fall," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1636, C.E.P.R. Discussion Papers.
  5. Richard E. Ericson, 1991. "The Classical Soviet-Type Economy: Nature of the System and Implications for Reform," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 5(4), pages 11-27, Fall.
  6. Mathias Dewatripont & Patrick Bolton, 1996. "The firm as a communication network," ULB Institutional Repository 2013/9597, ULB -- Universite Libre de Bruxelles.
  7. Dewatripont, Mathias & Roland, Gerard, 1995. "The Design of Reform Packages under Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 85(5), pages 1207-23, December.
  8. Jeffrey D. Sachs & Wing Thye Woo, 1997. "Understanding China's Economic Performance," NBER Working Papers 5935, National Bureau of Economic Research, Inc.
  9. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 37(3), pages 1120-1149, September.
  10. Aoki, Masahiko, 1986. "Horizontal vs. Vertical Information Structure of the Firm," American Economic Review, American Economic Association, American Economic Association, vol. 76(5), pages 971-83, December.
  11. Aghion, Philippe & Tirole, Jean, 1995. "Some implications of growth for organizational form and ownership structure," European Economic Review, Elsevier, Elsevier, vol. 39(3-4), pages 440-455, April.
  12. Jacques Cremer, 1980. "A Partial Theory of the Optimal Organization of a Bureaucracy," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 11(2), pages 683-693, Autumn.
  13. Argyres, Nicholas S., 1995. "Technology strategy, governance structure and interdivisional coordination," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 28(3), pages 337-358, December.
  14. Blanchard, O & Kremer, M, 1996. "Disorganization," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 96-30, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Milgrom, Paul & Roberts, John, 1995. "The Economics of Modern Manufacturing: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 85(4), pages 997-99, September.
  16. McMillan, John & Naughton, Barry, 1992. "How to Reform a Planned Economy: Lessons from China," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 8(1), pages 130-43, Spring.
  17. Susan Athey & Armin Schmutzler, 1995. "Product and Process Flexibility in an Innovative Environment," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 557-574, Winter.
  18. Bolton, Patrick & Farrell, Joseph, 1990. "Decentralization, Duplication, and Delay," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(4), pages 803-26, August.
  19. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, American Economic Association, vol. 80(3), pages 511-28, June.
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Cited by:
  1. Eric Maskin & Yingyi Qian & Chenggang Xu, 1999. "Incentives, Information, and Organizational Form," Working Papers, Stanford University, Department of Economics 99009, Stanford University, Department of Economics.
  2. Yingyi Qian, 1999. "The Institutional Foundations of China's Market Transition," Working Papers, Stanford University, Department of Economics 99011, Stanford University, Department of Economics.

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