This paper asks whether firms are markets and examines the difference and similarities of these dynamics depending on the result it goes beyond the theory of a firm. It appeals a self- organizing rule that may result in an alternative organization model to the capitalist enterprises controlled by a central authority.
Furthermore, it focuses to general definition of the alternative model “Spontaneous order” and enlightens this concept through the different views of economists like David Hume, Adam Smith and Friedrich von Hayek. In order to examine the feasibility and permanence of the Spontaneous order, the paper finds the building blocks of this model by showing some theories based on real life examples, followed by management of firms with definition of vertical and horizontal organization. Additionally, the structure of vertical and horizontal organization will be compared.
Table of Contents
1. Introduction
2. Spontaneous Order
2.1 Definition
2.2 Different Contributions
3. Management of firms
3.1 Definition of vertical and horizontal organization
3.2 Vertical vs. horizontal organization structure
4. Convention
4.1 Social orders subsume convention
4.2 Is it rational to follow the convention?
5. Case Study: Valve
5.1 How does it work
5.2 The future of valve
6. Conclusion
Objectives and Core Themes
The primary objective of this paper is to explore alternative organizational models that deviate from traditional capitalist hierarchies, focusing specifically on the concept of "spontaneous order." By bridging the gap between firm theory and social economics, the research investigates whether firms can function similarly to markets through self-organizing rules and conventions, using the video game company Valve as a modern, real-world case study.
- The theoretical foundations of "Spontaneous Order" as defined by Smith, Hume, and Hayek.
- Comparative analysis of vertical versus horizontal organizational structures in business.
- The role of conventions and game theory in shaping social and organizational order.
- An examination of non-traditional, self-managed corporate environments.
- The sustainability of non-hierarchical structures in competitive global markets.
Excerpt from the Book
2.1 Definition
“A marketing system is a network of individuals (…) linked directly or indirectly through sequential or shared participation in economic exchange that creates (…) and makes available assortments of products, both tangible and intangible, provided in response to customer demand” (Layton, 2007, p. 230).
Every exchange in marketing system is cost related and has to be analyzed. Firms are emerged to carry out marketing transactions to minimize these costs. The limit to the size of a firm is defined through the compression of the costs of organizing addition transactions in the firm with the cost of market transactions (Coase, 1988, p. 19-32).
Despite market economies the labor allocations in a firm do not always take place through price movements but rather through the directions of employers. If an employee changes his department in the same firm, he does not make this change because of relative prices, but because of an order of his entrepreneur (Coase, 1937, p. 387).
The act of firms is not shaped in this sense by marketing environment although their existence is strongly dependent on market vigorously. If companies are able to exist as an independent entity, it is possible to seek an alternative organization model that removes the borders preventing the companies from achieving greater success. Spontaneous order offers a new method that might bring this success.
Summary of Chapters
1. Introduction: Outlines the scope of the paper, specifically the exploration of firms as potential market-like entities governed by self-organizing principles rather than central authority.
2. Spontaneous Order: Examines the theoretical origins of spontaneous order, contrasting the views of economists like Hume, Smith, and Hayek regarding natural versus artificial organizational structures.
3. Management of firms: Defines the functional differences between vertical, hierarchical management and horizontal, cross-functional organizational models.
4. Convention: Analyzes how social conventions arise to solve interaction problems, utilizing game theory and the Nash Equilibrium to evaluate the rationality of following such collective rules.
5. Case Study: Valve: Investigates Valve as a practical application of non-hierarchical, self-managed organizational structures and considers the long-term feasibility of this model.
6. Conclusion: Synthesizes the theoretical and practical findings, acknowledging that while non-traditional structures like Valve's are innovative, traditional competitive pressures remain significant.
Keywords
Spontaneous order, Vertical organization, Horizontal organization, Convention, Game theory, Nash equilibrium, Valve, Self-management, Invisible hand, Economic analysis, Corporate hierarchy, Market transactions, Organizational structure, Business efficiency, Social order.
Frequently Asked Questions
What is the core focus of this research paper?
The paper examines whether firms can be conceptualized as markets and investigates the transition from traditional, centrally controlled capitalist firms to self-organizing, non-hierarchical models.
Which theoretical themes are central to the study?
The central themes include the theory of spontaneous order, the distinction between vertical and horizontal organizational structures, the economic function of conventions, and organizational management.
What is the primary objective of this work?
The goal is to determine the feasibility and permanence of an "alternative organization model" based on self-organizing rules rather than traditional management hierarchies.
Which scientific methods does the author employ?
The author uses a qualitative literature review of classical economic theory, combined with game theory models (specifically Nash Equilibrium) and a case study methodology.
What aspects of firm management are covered?
The paper covers the differences in communication, task allocation, and efficiency between vertical hierarchies and horizontal, cross-functional processes.
Which keywords best describe the paper's contents?
Spontaneous order, convention, horizontal/vertical organization, game theory, and corporate self-management are the most critical descriptors.
How does Valve incorporate spontaneous order?
Valve functions without bosses or traditional managers, allowing employees to choose tasks and form teams voluntarily, which the author describes as a form of spontaneous organizational order.
What is the significance of the Nash Equilibrium in this context?
It is used to analyze whether individuals have a rational motivation to follow conventions, demonstrating how social patterns like "spontaneous order" emerge in evolutionary processes.
What future does the author predict for companies like Valve?
The author is cautious, noting that while self-management is highly efficient, it must still meet the demands of 21st-century global competition, potentially leading to smaller, more fragmented corporate units.
- Arbeit zitieren
- Sevgi Erdin (Autor:in), 2013, Firms are not markets, right?, München, GRIN Verlag, https://www.grin.com/document/268352
