Basic Issues in Organizations: A Comparative Perspective

The paper provides a framework for the comparative analysis of organizations and identifies the factors that generate similarities and differences in their structure. The fundamental building blocks in our framework are (1) individual behavior, as determined by individuals’ bounded rationality and self-interest; (2) the technical-administrative problems created by bounded rationality and the agency-managerial problems engendered by self-interest; (3) the responses of the organization to these problems, e.g., hierarchy, monitoring, and incentive schemes; and (4) four sets of factors that induce variations in organizational structure via effects on one or more of the above variables: (a) the economic, political and legal system, (b) social norms, culture, and level of economic development, (c) products produced, production technologies, and markets for inputs and outputs, and (d) the identity of the organization’s controllers and their goals. J. Comp. Econom., June 1993, 17(2), pp. 207-242. University of Minnesota, Minneapolis, Minnesota 55455; Yale University, New Haven, Connecticut 06520; and SUNY-Stony Brook, Stony Brook, New York 11794.