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Firm Structure, Search and Environmental Complexity

  • Jason Barr

    ()

  • Nobuyuki Hanaki

    ()

This paper investigates the relationship between environmental complexity and firm organization. We ask: Given the complexity of the environment, which organizational structure and level of decision making authority optimizes performance of a firm? We assume the information processing organization is arranged hierarchically, but that decisions can be made at different levels, and thus centralization directly relates to the quantity of information used in making a decision. We model the external environment as a modified NK landscape. Via simulations, we explore which type of organizational structure and level of decision making maximizes firm profits, given the complexity of the environment.

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File URL: http://andromeda.rutgers.edu/~econnwk/workingpapers/2005-007.pdf
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Paper provided by Department of Economics, Rutgers University, Newark in its series Working Papers Rutgers University, Newark with number 2005-007.

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Length: 33 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:run:wpaper:2005-007
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  1. Myong-Hun Chang & Joseph E. Harrington Jr., 2000. "Centralization vs. Decentralization in a Multi-Unit Organization: A Computational Model of a Retail Chain as a Multi-Agent Adaptive System," Working Papers 00-02-010, Santa Fe Institute.
  2. Myong-Hun Chang & Joseph E Harrington, 2000. "Organization of Innovation in a Multi-Unit Firm: Coordinating Adaptive Search on Multiple Rugged Landscapes," Economics Working Paper Archive 442, The Johns Hopkins University,Department of Economics.
  3. Raghuram Rajan & Julie Wulf, 2003. "The Flattening Firm: Evidence from Panel Data on the Changing Nature of Corporate Hierarchies," NBER Working Papers 9633, National Bureau of Economic Research, Inc.
  4. Sadao Sakakibara & Barbara B. Flynn & Roger G. Schroeder & William T. Morris, 1997. "The Impact of Just-in-Time Manufacturing and Its Infrastructure on Manufacturing Performance," Management Science, INFORMS, vol. 43(9), pages 1246-1257, September.
  5. Auerswald, Philip & Kauffman, Stuart & Lobo, Jose & Shell, Karl, 2000. "The production recipes approach to modeling technological innovation: An application to learning by doing," Journal of Economic Dynamics and Control, Elsevier, vol. 24(3), pages 389-450, March.
  6. Barr, Jason & Saraceno, Francesco, 2002. "A computational theory of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 345-361, November.
  7. Myong-Hun Chang & Joseph E. Harrington, Jr, 2003. "Multimarket Competition, Consumer Search, and the Organizational Structure of Multiunit Firms," Management Science, INFORMS, vol. 49(4), pages 541-552, April.
  8. Richard N. Langlois, 2002. "Modularity in Technology and Organization," Chapters, in: Entrepreneurship and the Firm, chapter 2 Edward Elgar Publishing.
  9. Kauffman, Stuart & Lobo, Jose & Macready, William G., 2000. "Optimal search on a technology landscape," Journal of Economic Behavior & Organization, Elsevier, vol. 43(2), pages 141-166, October.
  10. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  11. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, vol. 79(1), pages 1-45, March.
  12. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
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