Archive for 12 April 2007
Organizational Innovation: Evidence from Food and Agriculture
| Peter Klein |
Just in time to address some of the issues raised in Nicolai’s provocative post, my colleagues Harvey James, Mike Sykuta, and I have revised our paper, “Markets, Contracts, or Integration? The Adoption, Diffusion, and Evolution of Organizational Form,” which focuses on organizational innovation in US agriculture. Here is the abstract:
The rise of contract farming and vertical integration is one of the most important changes in modern agriculture. Yet the adoption and diffusion of these new forms of organization has varied widely across regions, commodities, and farm types. Transaction cost and other modern theories of the firm help explain the advantages of contracting and integration over reliance on spot markets and commodity brokers. However, these theories do not address the variation in adoption rates of new organizational forms. This paper lays out a more dynamic framework for understanding the evolution of organizational practices in U.S. agriculture, drawing on theories of the diffusion of technology and organizational complementarities. Using recent trends as stylized facts we argue that the agrifood sector is characterized by strong complementarities and that identifying and describing these complementarities more fully sheds considerable light on the organizational structure of agricultural production. We illustrate our arguments with case studies from the oilseed, poultry, and hog industries.
This is a draft, and comments are most welcome.
Empowerment at Netflix
| Peter Klein |
Strong delegation, despite potential drawbacks, can be effective in particular circumstances. DVD-by-mail pioneer Netflix has gone this route, with apparent success:
Netflix’s time off rules — or lack thereof — are part of a broad culture of employee autonomy instilled in the company when [CEO Reed] Hastings founded it a decade ago. The executives trust staffers to make their own decisions on everything — from whether to bring their dog to the office to how much of their salary they want in cash and how much in stock options. Workers are treated, as Chief Talent Officer Patty McCord likes to say, as adults.
“We want our employees to have great freedom — freedom to be brilliant or freedom to make mistakes,” Hastings said.
Curiously, there is nothing in the news story about how output is measured, how employees are compensated, or other elements of the firm’s organizational architecture. What happens, for instance, when employees make mistakes? As argued by Brickley, Smith, and Zimmerman in their 1995 article (and textbook), decentralization works only when bundled with appropriate compensation and performance evaluation systems. Or, in the words of that great philosopher, Spider-Man’s Uncle Ben, “With great power comes great responsibility.”
Thanks to Eddie Garrett for the tip.
Organizations and Markets 
Recent Comments