Note—Modeling Coordination in Organizations and Markets
Management Science · 1992 · Volume 38 · Issue 12
Abstract
In an earlier issue of Management Science , Thomas Malone (1987) utilizes the concept of vulnerability costs in order to compare the degree of flexibility exhibited by markets and hierarchies. The purpose of this note is to redefine the concept of vulnerability to include the corresponding opportunity costs that are created when a coordinating structure restricts the ability to adjust to a change in market conditions. The conclusion reached is that those structures experiencing the lowest opportunity costs are the least vulnerable, and can therefore be classified as the most flexible.
Keywords
organizational economics, coordination, information processing, organizational structure, transaction costs
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