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Organizational Languages

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  • Birger Wernerfelt

Abstract

This paper is concerned with communication within a team of players trying to coordinate in response to information dispersed among them. The problem is nontrivial because they cannot communicate all information instantaneously but have to send longer or shorter sequences of messages, using coarse codes. We focus on the design of these codes and show that members may gain compatibility advantages by using identical codes and that this can support the existence of several, more or less efficient, symmetric equilibria. Asymmetric equilibria may exist only if coordination across different sets of members is of sufficiently different importance. The results are consistent with the stylized fact that firms differ even within industries and that coordination between divisions is harder than coordination inside divisions.

Suggested Citation

  • Birger Wernerfelt, 2004. "Organizational Languages," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(3), pages 461-472, September.
    • Handle: RePEc:bla:jemstr:v:13:y:2004:i:3:p:461-472
    DOI: 10.1111/j.1430-9134.2004.00019.x
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    2. Özgecan Koçak & Massimo Warglien, 2020. "When three’s a crowd: how relational structure and social history shape organizational codes in triads," Journal of Organization Design, Springer;Organizational Design Community, vol. 9(1), pages 1-27, December.
    3. Blume, Andreas, 2000. "Coordination and Learning with a Partial Language," Journal of Economic Theory, Elsevier, vol. 95(1), pages 1-36, November.
    4. Achim Hecker, 2009. "Determinanten von Offshore-Outsourcing-Aktivitäten im deutschen Mittelstand," Schmalenbach Journal of Business Research, Springer, vol. 61(6), pages 628-653, September.
    5. Ziebarth, Deborah, 2016. "Altruistic and economic measurements used for prevention health services: Faith community nursing program," Evaluation and Program Planning, Elsevier, vol. 57(C), pages 72-79.
    6. Jacques Crémer & Luis Garicano & Andrea Prat, 2007. "Language and the Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 373-407.
    7. Lauren Feiler & Colin F. Camerer, 2010. "Code Creation In Endogenous Merger Experiments," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 337-352, April.
    8. Marco LiCalzi & Nadia Maagli, 2013. "Bargaining over a common conceptual space," Working Papers 30, Venice School of Management - Department of Management, Università Ca' Foscari Venezia.
    9. Özgecan Koçak & Phanish Puranam, 2022. "Separated by a Common Language: How the Nature of Code Differences Shapes Communication Success and Code Convergence," Management Science, INFORMS, vol. 68(7), pages 5287-5310, July.
    10. Massimo Warglien, 2013. "Language and economic organization," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 8, Edward Elgar Publishing.
    11. Hirokazu Takizawa, 2003. "Coordination Costs and the Optimal Partition of a Product Design," Discussion papers 03014, Research Institute of Economy, Trade and Industry (RIETI).
    12. Kocak, Ozgecan & Warglien, Massimo, 2018. "When Three’s a Crowd: How social structure affects the creation of organizational codes in triads," SocArXiv 4w68c, Center for Open Science.
    13. Birger Wernerfelt, 2013. "Small forces and large firms: Foundations of the RBV," Strategic Management Journal, Wiley Blackwell, vol. 34(6), pages 635-643, June.

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