Economic Approaches to Organization

401 Pages·2017·8.057 MB·English

by  Douma, Sytse;Schreuder, H(Contributor)

ECONOMIC APPROACHES
TO ORGANIZATIONS ECONOMIC
Sixth Edition
Sytse Douma and Hein Schreuder
APPROACHES TO
Why do organizations exist?
What is the relationship between markets and organizations?
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When does one perform better than the other?
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Find the answers in Economic Approaches to Organizations!
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Now in its sixth edition, this text emphasizes the importance of economic perspectives and theories in the
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study of organizations and management. It explains diff erent economic approaches such as behavioural R
theory of the fi rm, game theory, agency theory, transaction cost economics, economics of strategy and GO Sixth Edition
evolutionary approaches in a non-technical way.
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This fully updated edition is packed with practical examples from real-world companies, helping you to A
understand how the concepts relate to economic and organizational problems happening in the world today.
NI Sytse Douma and Hein Schreuder
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New to this edition: I
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(cid:127) Introduction of digital platforms as coordination mechanism and platform organizations as new A

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organizational type. Economic explanation of the business models of Airbnb, Amazon, Google, Uber P
and similar platform organizations. T
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(cid:127) A separate chapter on behavioural economics covering bounds on rationality and self-interest as well I
as prospect theory. OR
(cid:127) An update of the exciting new fi eld of complexity economics focusing on learning and adaptation. O
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(cid:127) Three application chapters on Mergers and acquisitions, Corporate governance and Hybrid forms
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(for example, joint ventures, business groups and franchising) off ered electronically in addition to the S
material in the book. C
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This is the ideal text for courses on Organization and Management from an economic perspective. The text
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can also be used as a supplement to a larger text on Organization and Management or Strategic Management.
Economics students will benefi t from a concise introduction to a fi eld that is related, but all too often S
unexplored.
Sixth
Sytse Douma is Honorary Professor of Business Administration at Tilburg University.
Hein Schreuder was Executive Vice President of Corporate Strategy and Acquisitions at Royal DSM N.V. Edition
until 2012. He is a Honorary Professor of Business Economics at Maastricht University and Board member of
the Vlerick Business School in Belgium. He is also Chairman of Ecorys, a leading research-based economic HS
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Economic Approaches to Organizations
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Economic Approaches
to Organizations
Sytse Douma
Tilburg University, the Netherlands
Hein Schreuder
Vlerick Business School, Belgium
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First published 1991 (print)
Second edition published 1998 (print)
Third edition published 2002 (print)
Fourth edition published 2008 (print)
Fifth edition published 2013 (print and electronic)
sixth edition published 2017 (print and electronic)
© Prentice Hall Europe 1991, 1998 (print)
© Pearson Education Limited 2002, 2008 (print)
© Pearson Education Limited 2013, 2017 (print and electronic)
The rights of Sytse Douma and Hein Schreuder to be identified as authors of this work have been asserted by them in accordance with the
Copyright, Designs and Patents Act 1988.
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ISBN: 978-1-292-12890-0 (print)
978-1-292-17572-0 (PDF)
978-1-292-12895-5 (ePub)
British Library cataloguing-in-Publication data
A catalogue record for the print edition is available from the British Library
Library of congress cataloging-in-Publication data
Names: Douma, S. W., author. | Schreuder, H., author.
Title: Economic approaches to organizations / Sytse Douma, Tilburg
University, the Netherlands, Hein Schreuder, Vlerick Business School,
Belgium.
Description: Sixth edition. | Harlow, England ; New York : Pearson Education,
2017 | Includes bibliographical references and index.
Identifiers: LCCN 2016039813| ISBN 9781292128900 (Print) | ISBN 9781292175720
(PDF) | ISBN 9781292128955 (ePub)
Subjects: LCSH: Managerial economics.
Classification: LCC HD30.22 .D69 2017 | DDC 338.5/024658—dc23
LC record available at https://lccn.loc.gov/2016039813
10 9 8 7 6 5 4 3 2 1
21 20 19 18 17
Print edition typeset in 9.5/12.5 pt Stone Serif by 71 by Spi Global (P) Ltd.
Printed in Slovakia by Neografia
NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION
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Contents
Preface xi
Acknowledgements xv
Part I Foundations
1
1 Markets and organizations 3
1.1 The economic problem 3
1.2 The division of labour 5
1.3 Specialization 7
1.4 Coordination 9
1.5 Markets and organizations 10
1.6 Information 14
1.7 The environment and institutions 16
1.8 Historical perspective 22
1.9 Summary: the conceptual framework of this book 24
1.10 Outline of the book 25
Questions 26
Note 26
2 Markets 27
2.1 Introduction 27
2.2 Market interaction: analysis of demand and supply 28
2.3 Decision-making by consumers 29
2.4 Decision-making by producers 31
2.5 Market coordination 32
2.6 The paradox of profits 33
2.7 Competitive markets 33
2.8 The main assumptions underlying standard
microeconomic theory 34
2.9 Summary: how according to standard microeconomic
theory economic decisions are coordinated by the market 36
Questions 37
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vi Contents
3 Organizations 38
3.1 The world of organizations 38
3.2 Organizational coordination 39
3.3 Types of organizations 44
3.4 Organizational markets 49
3.5 Organized markets 50
3.6 The rise of the Internet and the digitization of organizations 53
3.7 Digital platforms: a new coordination mechanism 56
3.8 The Platform Organization 59
3.9 Summary: how organizations achieve coordination 62
Questions 64
Notes 64
4 Information 66
4.1 Coordination and information 66
4.2 Hidden information 71
4.3 Hidden action 78
4.4 The value of information 83
4.5 Information as an economic good 86
4.6 Summary: information problems for markets and organizations 88
Questions 90
Notes 91
5 Game theory 92
5.1 Introduction 92
5.2 The prisoner’s dilemma 93
5.3 Coordination games 97
5.4 The entry game 99
5.5 The iterated prisoner’s dilemma 103
5.6 Auctions 105
5.7 Evolutionary game theory 111
5.8 Summary: insights from game theory 116
Questions 118
6 Econs and Humans 119
6.1 Introduction 119
6.2 The social domain versus the economic domain 120
6.3 Economic, social and moral man: bounds
on self-interest 121
6.4 Bounds on rationality 124
6.5 Prospect theory 127
6.6 Summary: behavioural economics 130
Questions 131
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Contents vii
Part II Economic Approaches
133
7 Behavioural theory of the firm 135
7.1 Introduction 135
7.2 The firm as a coalition of participants 135
7.3 Organizational goals 139
7.4 Organizational expectations 142
7.5 Organizational choice 142
7.6 From bounded rationality to behavioural economics 145
7.7 Summary: goals and decision-making within
the firm in behavioural theory 150
Questions 152
Note 154
8 Agency theory 155
8.1 Introduction 155
8.2 Separation of ownership and control 156
8.3 Managerial behaviour and ownership structure 159
8.4 Entrepreneurial firms and team production 165
8.5 The firm as a nexus of contracts 167
8.6 Theory of principal and agent 169
8.7 Applying agency theory 178
8.8 Summary: agency relations between owners,
managers and employees 182
Questions 184
Note 186
9 Transaction cost economics 187
9.1 Introduction 187
9.2 Behavioural assumptions: bounded rationality
and opportunism 189
9.3 Dimensions of transactions 195
9.4 Peer groups 200
9.5 Simple hierarchies 202
9.6 Multistage hierarchies: U-form and M-form enterprises 204
9.7 Organizational markets 205
9.8 Digitization and transaction costs 208
9.9 Markets and organizations: are these all there is? 211
9.10 Governance in a three-level schema 223
9.11 Summary: effect of transaction costs on choosing
between markets and organizations and
organizational forms 225
Questions 227
Notes 228
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viii Contents
10 E conomic contributions to business/competitive
strategy 229
10.1 Introduction 229
10.2 Industry analysis 232
10.3 Competitor analysis 236
10.4 Competitive strategy 239
10.5 Resource-based view of the firm 240
10.6 Dynamic capabilities 244
10.7 Move and counter move 248
10.8 Summary: how economic analysis can contribute
to the formulation of competitive strategies 258
Questions 259
Note 259
11 Economic contributions to corporate strategy 260
11.1 Introduction 260
11.2 Unrelated diversification 263
11.3 Related diversification 271
11.4 Horizontal multi-nationalization 276
11.5 Vertical integration 279
11.6 Summary 284
Questions 286
Notes 287
12 Evolutionary approaches to organizations 288
12.1 Introduction 288
12.2 Giraffes 288
12.3 Organizations and giraffes 290
12.4 Organizational ecology 293
12.5 An evolutionary theory of economic change 302
12.6 Comparison 307
12.7 The evolution of dynamic capabilities 310
12.8 Further developments 317
12.9 Summary: the evolutionary perspective 323
Questions 325
Notes 327
13 All in the family 328
13.1 Introduction 328
13.2 The basic conceptual framework 328
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Contents ix
13.3 Family resemblances 330
13.4 Family differences 333
13.5 Summary: all in the family? 341
13.6 Organizations as complex, adaptive systems 342
Questions 357
Notes 358
Bibliography 359
Index 373
Lecturer Resources
ON THE
For password-protected online resources tailored to WEBSITE
support the use of this textbook in teaching, including
three additional online chapters, please visit
www.pearsoned.co.uk/douma
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