innovations from an organizational economics perspective
Written for
Maastricht University (UM)
Healthcare Innovation Management and Policy
HPIM4001: Economics of Healthcare
All documents for this subject (11)
Seller
Follow
963
Reviews received
Content preview
Case 4: Innovations from an organizational (economics) perspective
Susan, Mike and George are on their way to another conference session. This session is about
organizational innovations (e.g. vertical and horizontal integration) and the role that innovation plays
in organizations.
The session is started with a general talk by the chairman who introduces three speakers. “Welcome
to our first speaker who is an economist from the UK”, the chairman says.
Speaker 1: “Thank you, mister chairman, ladies and gentlemen. During my presentation, I will try to
describe that decisions to innovate are usually made at the level of a firm. However, as there are
different types of firms, innovation will play a different role in each firm. The effects of innovation on
the costs of these firms will also vary. I will try to describe some of these differences and effects. At
the start of my presentation, I want to ask you whether you think there are differences between
competitive and monopoly firms as regards innovation”. Susan, who hears this question, has never
thought of such a difference. “I think not”, she says, “As long as all these firms have the same goal of
profit maximization, there will be no difference with respect to innovation”. Other audience
members do not agree with Susan.
After an extensive discussion between the first speaker and the audience, the chairman welcomes
the second speaker. She is an economist from the US who has a special interest in transaction cost
economics.
Speaker 2: “Thank you all. The previous speaker talked about innovation and the firm. Therefore, I
want to start my presentation by telling you that organizations can also use innovation as a strategy
to achieve (long-term) objectives. Such strategies may have implications for the boundaries of
organizations as some may engage into mergers, vertical integration and outsourcing. During my
presentation, I want to show you that the decision to engage into vertical integration mainly depends
on the degree of transaction costs involved and possibly other economic factors. Transaction costs
are also important for decisions to outsource certain services that are normally supplied within the
healthcare organization”.
Again, after a fierce discussion, the chairman welcomes the third speaker who is from the
Netherlands. She is an expert in organizational innovations.
Speaker 3: “Thank you. The previous speaker talked about vertical integration. However, this is just
one example of an organizational innovation. There are many other examples of integration
strategies (e.g. horizontal integration or patient-centered integration strategies) that healthcare
providers can use. Generally, for over 25 years now, healthcare systems have focused on improving
integration between organizations and levels of care. It is widely believed that the greater alignment
and synergy achieved through integration enhances quality of care, efficiency, and patient
satisfaction, as the previous speaker indicated. During my presentation I will give you an overview of
the evolution of – and shifts in – healthcare integration strategies over time. I will also show that not
all efforts to integrate healthcare delivery systems have been successful. Moreover, integration may
also raise adverse effects such as anticompetitive behavior or spending increases. Using economic
theories, I will also provide you with some explanations for this.
COVID-19 Task for Post-discussion
Please read the following news article and respond to the questions:
“COVID-19 exposes weak link for hospitals: outsourced cleaners”
https://www.newswise.com/coronavirus/covid-19-exposes-weak-link-for-hospitals-outsourced-
cleaners/?article_id=728581
Based on the article and the literature for this case, discuss
1.Why the cleaning staff might have been outsourced in the past
The cleaning staff might have been outsourced in the past because it was cheaper for hospitals (less
transaction costs).
2.What you consider the most optimal vertical arrangement of hospital cleaning staff
, The most optimal vertical arrangement of hospital cleaning staff is that a hospital takes a cleaning
company over (so there are less transaction costs).
Aims
- Role of innovations in firms
- Organizational innovations (e.g. horizontal and vertical integration)
- Transaction costs and decision to vertically integrate
Overview
From the viewpoint of economic theory, what role does innovation play in
(different types of) firms and what is the impact of innovations on the costs of
the firm?
Organizations, value chains, and institutions
Organization: a social entity which is goal-directed, is designed as a deliberately structured and
coordinated activity system, and is linked to the external environment (Daft, Murphy, & Willmott,
2014); a decision-making unit engaged in production (Hall, 1994); a system of interrelated behaviors
of people who are performing a task that has been differentiated into several distinct subsystems,
each subsystem performing a portion of the task, and the efforts to each being integrated to achieve
effective performance of the system (Lawrence & Lorsch, 1967) (e.g. Maastricht University)
Organizations have boundaries
Boundaries: the scope of activities in which the firm engages (Hall, 1994) (e.g. Maastricht University
does research, but no consulting; hospitals do short-term care, but no long-term care)
Organizations operate in a supply/value chain
- Most of the time there are multiple value chains in an organization
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller 963. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.23. You're not tied to anything after your purchase.
