Attribute coordination in organizations

Abstract

We study coordination in organizations with a variety of organizational forms. Coordination in organization is modeled as the adjustment of attributes and capacities of tasks when facing external shocks. An M-form (U-form) organization groups complementary (substitutable) tasks together in one unit. In the presence of only attribute shocks, particularly when gains from specialization are small, communication is poor, or shocks are more likely, the expected payoff of the decentralized M-form is the highest. When facing both types of shocks, centralization does better if communication is good. The implications of organizational forms for the patterns of innovations and reforms within an organization, particularly centralized versus decentralized experiments and top-down versus bottom-up reforms, are discussed.