DP4096 The Demand for Coordination

Author(s): Wouter Dessein, Tano Santos
Publication Date: October 2003
Keyword(s): authority, communication, coordination, information technology, organizations, skills, specialization
JEL(s): D2, D8, J2, L2
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4096

This paper endogenizes coordination problems in organizations by allowing for both ex ante coordination of activities, using rules and task guidelines, and ex post coordination, using communication and broad job assignments. It shows that: (i) Task specialization and the division of labour is mainly limited by employee discretion, rather than by the importance of coordination. In particular, specialization is often non-monotonic in the importance of coordination. (ii) Organizations exhibit increasing returns to ex post coordination. This rationalizes discrete ?shifts? in organizational design from very rigid and specialized task assignments, to very flexible organizations characterized by extensive task-bundling, intensive horizontal communication and substantial employee discretion. (iii) Broad task assignments and intensive horizontal communication are complementary. Hence, lower communication costs often result in less specialization.