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Firms’ Organization and Efficient Communications Networks
Author(s) -
Creti Anna
Publication year - 2001
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00236
Subject(s) - externality , economics , network effect , microeconomics , profit (economics) , simple (philosophy) , function (biology) , industrial organization , philosophy , epistemology , evolutionary biology , biology
This paper presents a very simple characterization of the technological choices underlying M‐form and U‐form organizations. We first show that the externalities within a function favour the M‐form, which gives higher profit, higher output level and lower prices than the U‐form. The major innovation of the paper consists in the analysis of communication flows that constitute a positive externality on demand schedules. When these information flows are introduced, we find conditions under which the U‐form gives output and communication flows higher than the M‐form.