Co-ordination and Spontaneity in Non-Hierarchical Business Organizations
New Thinking in Political Economy series
Economists have regarded the market as a decentralized system of resource allocation for a long while. In the market, no one is in charge of allocating resources beyond what every individual has under his or her command. For instance, there is no one centrally deciding whether car makers should produce white cars or whether computer makers should make laptops rather than desktop computers. In such a system, entrepreneurs constantly bid resources away from their current uses in order to reallocate them towards what consumers may want to buy. In the marketplace, resources are bought and sold without anyone deciding what the overall allocation of resources should look like. The opposite is true in business ﬁrms – or so it seems. Indeed, the traditional story is to say that ﬁrms are islands of planning and hierarchy in the sea of the market. For years, ﬁrms’ internal structures were not a subject of inquiry. Economists assumed they were centralized hierarchies because in economic theory ﬁrms were nothing more than production functions. Things started to change in the 1960s with, for instance, the work of Alfred Chandler, which looked at the inside of the black box to discover that ﬁrms can have some degree of decentralization. Progressively economists started paying more and more attention to the inner structure of ﬁrms and the role of hierarchy. More speciﬁcally, the idea that hierarchy may be an impediment to ﬁrm development has become a subject of inquiry in recent years with the emergence of corporations with...