The organization of work a comparative institutional assessment

Abstract

Sociologists, radical economists and others who claim that hierarchical modes of organization are explained by power rather than efficiency neglect transaction costs in reaching this conclusion. This is understandable since neoclassical economics also neglects transaction cost But it is also regrettable, since the transaction costs that arise when intermediate product is transferred across technologically separable stages of production depends crucially on organizational structure. A microanalytic assessment of alternative modes of organization entails (1) an identification of the relevant transaction cost dimensions for assessing performance, (2) a description of the organizational and operating properties of alternative modes, and (3) a comparative evaluation of alternative modes in terms of their transaction cost attributes. Transaction costs drive organizational outcomes in considerable degree.