Organization for Premaster Students
By Patrick Dekkers
, ECONOMIC APPROACHES TO ORGANIZATIONS: SUMMARY Patrick Dekkers
Contents
Chapter 1: Markets and Organizations ......................................................................................................... 3
Chapter 3: Organisations .............................................................................................................................. 5
Chapter 4: Information ................................................................................................................................. 8
Chapter 5: Game Theory ............................................................................................................................. 11
Chapter 6: Behavioral Theory of the Firm .................................................................................................. 14
Chapter 7: Agency Theory (Section 7.6 not included!) ............................................................................... 17
Chapter 8: Transaction Cost Economics ..................................................................................................... 22
Chapter 9: Economic Contributions to Business/Competitive Strategy ..................................................... 26
Chapter 10: Corporate Strategy & Institutions ........................................................................................... 29
Chapter 14: Hybrid Forms ........................................................................................................................... 32
Chapter 15: Corporate Governance ............................................................................................................ 34
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, ECONOMIC APPROACHES TO ORGANIZATIONS: SUMMARY Patrick Dekkers
Chapter 1: Markets and Organizations
The economic problem:
The economic problem is the problem on how to make best use of the available resources. Optimal
allocated resources are considered to be the resources used with efficiency. The economical aspect in a
problem deals with the optimal allocation of scarce resources.
The division of labor:
The division of labor focuses on the specialization of workers in one particular task, rather than to focus
on a whole lot of tasks. It refers to the splitting of composite tasks into their component parts and
having these performed separately. In the traditional primeval setting, people were much more self-
sufficient, but were less efficient in their tasks. Organizational charts offer a reflection of the division of
labor within a company.
Specialization:
Division of labor leads to specialization. According to Smith, the increase in quantity of work is owed to
three different circumstances:
The increase of dexterity in every particular workman
The saving of the time which is commonly lost in passing from one species of work to another
The invention of a great number of machines which facilitate and abridge labor
Specialized production is considered to be more efficient, due to the increased amount of production
with less labor effort. In specialization, the work is selected based on ones needs and capabilities.
Devoting oneself to one particular task, results in increased levels of experience and performance and
improved methods and instruments.
Coordination:
In relation to division of labor leading to specialization, specialization leads to a need for coordination
within markets or within organizations. Due to specialization, people are hardly self-sufficient anymore,
and rely on the production of goods made by others.
Therefore, the exchange of goods has to take place. In economics, is broader than just the market
exchange and the goods involved are not limited to marketable products. Information, time and favors
are considered to be “goods” in exchange as well. Whenever this exchange takes place, we speak of an
economic transfer.
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By Patrick Dekkers
, ECONOMIC APPROACHES TO ORGANIZATIONS: SUMMARY Patrick Dekkers
Contents
Chapter 1: Markets and Organizations ......................................................................................................... 3
Chapter 3: Organisations .............................................................................................................................. 5
Chapter 4: Information ................................................................................................................................. 8
Chapter 5: Game Theory ............................................................................................................................. 11
Chapter 6: Behavioral Theory of the Firm .................................................................................................. 14
Chapter 7: Agency Theory (Section 7.6 not included!) ............................................................................... 17
Chapter 8: Transaction Cost Economics ..................................................................................................... 22
Chapter 9: Economic Contributions to Business/Competitive Strategy ..................................................... 26
Chapter 10: Corporate Strategy & Institutions ........................................................................................... 29
Chapter 14: Hybrid Forms ........................................................................................................................... 32
Chapter 15: Corporate Governance ............................................................................................................ 34
2
, ECONOMIC APPROACHES TO ORGANIZATIONS: SUMMARY Patrick Dekkers
Chapter 1: Markets and Organizations
The economic problem:
The economic problem is the problem on how to make best use of the available resources. Optimal
allocated resources are considered to be the resources used with efficiency. The economical aspect in a
problem deals with the optimal allocation of scarce resources.
The division of labor:
The division of labor focuses on the specialization of workers in one particular task, rather than to focus
on a whole lot of tasks. It refers to the splitting of composite tasks into their component parts and
having these performed separately. In the traditional primeval setting, people were much more self-
sufficient, but were less efficient in their tasks. Organizational charts offer a reflection of the division of
labor within a company.
Specialization:
Division of labor leads to specialization. According to Smith, the increase in quantity of work is owed to
three different circumstances:
The increase of dexterity in every particular workman
The saving of the time which is commonly lost in passing from one species of work to another
The invention of a great number of machines which facilitate and abridge labor
Specialized production is considered to be more efficient, due to the increased amount of production
with less labor effort. In specialization, the work is selected based on ones needs and capabilities.
Devoting oneself to one particular task, results in increased levels of experience and performance and
improved methods and instruments.
Coordination:
In relation to division of labor leading to specialization, specialization leads to a need for coordination
within markets or within organizations. Due to specialization, people are hardly self-sufficient anymore,
and rely on the production of goods made by others.
Therefore, the exchange of goods has to take place. In economics, is broader than just the market
exchange and the goods involved are not limited to marketable products. Information, time and favors
are considered to be “goods” in exchange as well. Whenever this exchange takes place, we speak of an
economic transfer.
3
