Powell on network theory

Topics: Computer network, Economics, Economy Pages: 59 (1887 words) Published: May 26, 2014
Powell
 (1990)
 
Introduction
 
 
Powell
 argues
 that
 previous
 research
 on
 economic
 organizations
 have
 focused
 on
 two
 
kinds
 of
 structures,
 markets
 and
 hierarchies,
 but
 that
 these
 structures
 are
 inadequate
 to
 
explain
 some
 complex
 interactions
 that
 occur
 in
 today's
 business
 world.
 He
 suggests
 a
 
new
 structure,
 called
 a
 network,
 that
 he
 believes
 is
 a
 better
 description
 of
 business
 
interactions
 in
 some
 situations.
 

Market,
 Hierarchy
 and
 Network
 
In
 a
 market,
 there
 are
 buyers
 and
 sellers
 and
 the
 relationship
 between
 buyers
 and
 sellers
 is
 
limited
 to
 single
 interactions.
 The
 emphasis
 is
 on
 a
 single
 transaction
 and
 not
 on
 
maintaining
 continued
 trust
 between
 the
 buyer
 and
 seller.
 Markets
 are
 good
 for
 
describing
 transactions
 that
 involve
 quantifiable
 products
 where
 the
 seller
 who
 can
 
produce
 the
 product
 for
 the
 cheapest
 price
 is
 typically
 the
 winner.
 One
 of
 Powell's
 best
 
descriptions
 of
 a
 market
 is
 as
 follows:
 
 
"The
 stereotypical
 competitive
 market
 is
 the
 paradigm
 of
 individually
 self-­‐interested,
 non-­‐
cooperative,
 unconstrained
 social
 interaction.
 As
 such,
 markets
 have
 powerful
 incentive
 
effects
 for
 they
 are
 the
 arena
 which
 each
 party
 can
 fulfill
 its
 own
 internally
 defined
 needs
 
and
 goals."
 
The
 hierarchy
 arises
 out
 of
 a
 marketplace
 when
 it
 becomes
 more
 efficient
 for
 an
 agent
 to
 
take
 some
 transactions
 out
 of
 the
 marketplace
 and
 place
 those
 transactions
 within
 its
 
own
 organization.
 Instead
 of
 a
 market
 following
 the
 rules
 of
 supply
 and
 demand,
 the
 
hierarchy
 has
 management
 and
 administration
 that
 simply
 orders
 its
 employees
 what
 to
 
do.
 The
 employees,
 since
 the
 hierarchy
 is
 paying
 them,
 simply
 do
 what
 they
 are
 told.
 The
 
hierarchy
 defines
 the
 internal
 structure
 of
 companies.
 Powell
 summarizes
 the
 hierarchy
 
as
 follows:
 
 
"A
 hierarchical
 structure
 -­‐
 clear
 departmental
 boundaries,
 clean
 lines
 of
 authority,
 detailed
 
reporting
 mechanisms,
 and
 formal
 decision
 making
 procedures
 -­‐
 is
 particularly
 well-­‐suited
 
for
 mass
 production
 and
 distribution."
 
Networks
 are
 a
 more
 light-­‐weight
 organizational
 structure
 than
 the
 hierarchy.
 
Interactions
 in
 a
 network
 are
 not
 the
 "discrete
 exchanges"
 found
 in
 the
 marketplace
 nor
 
are
 they
 ordered
 by
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Network Theory Essay
  • Graph Theory & Small Networks Essay
  • Theories Essay
  • Theories Essay
  • Information Theory, Systems Theory, Networks, Systems, Processes.Pdf Essay
  • Essay about Network Diagram
  • Essay about network topology
  • Understand theories of relationships and social networks Essay

Become a StudyMode Member

Sign Up - It's Free