Employees and Entrepreneurship
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Employees and Entrepreneurship

Co-ordination and Spontaneity in Non-Hierarchical Business Organizations

Ivan Pongracic Jr.

Over the last few decades, there has been a great deal of management literature recommending the removal of firms’ hierarchies and the empowerment of employees. Ivan Pongracic, Jr. examines these themes through the lense of the economic theory of the firm. Balancing the tendency for management literature to overlook basic costs and trade-offs of decentralization, and the rigidity of economics that hinders an appreciation for the real world phenomenon of decentralization, this book arrives at a realistic middle ground between the two extremes. The dance between hierarchy and employee empowerment exists in even the most hierarchical firms, and this book explores this often overlooked dynamic.
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Chapter 4: Spontaneous Order in Decentralized Firms

Ivan Pongracic Jr.


4. Spontaneous order in decentralized firms When business profits leap ahead, the entrepreneur will eventually even be ready to go beyond the yield attributable to labor and to let the workers share to some extent in the entrepreneurial profits, adding such share to their wages. A remarkable fact! It may be viewed as a symptom of the fact that between employers and employees, much as they may be at odds with one another, there yet exists fundamentally a farreaching community of interests. In today’s combative mood the existence of this community is not publicly admitted, but it nevertheless is at work, if tacitly. The whole circle of people engaged by the enterprise, from the top managers to the lowliest workers, is bound together by their common stake in the success of the business, and in the struggle with the customers and competitors it feels as a unit as a companionship of fate. (Wieser 1926, p. 354)1 The most important hitherto unexplained aspect of decentralization within firms is how the actions of multitudes of employees can ever be co-ordinated in the absence of a conscious, explicit command-and-control system. There are several questions to be answered in regard to this point: Can an intra-firm decentralization actually be an example of spontaneous order? What is the mechanism by which this order comes about? Is it possible to achieve spontaneous order if people are always acting in opportunistic ways? Even if people are willing to be cooperative, moral, fair, and...

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