Organizing Technological Interdependencies: A Coordination Perspective on the Firm

This paper develops a coordination perspective on the firm. The basic idea is to combine insights in the division of labor with insights into the allocation of property rights. Thus, a basic argument is that use rights over productive assets are necessary in order to accumulate the experience needed to perform improvements in production. Specialization in production accelerates the accumulation of skills from learning by doing in production. However, specialization introduces greater complexity and new kinds of tools and equipment and this in turn create uncertainty about the best way of coordinating the specialized and interdependent activities. The result may be bottlenecks in production and uneven development of components. Experimenting with the coordination of tasks is necessary in order to eliminate these problems. However, such experimentation is best facilitated by a certain structure of property rights. Coordination by direction provides a cheap way of conducting the experiments needed to collect information on how best to coordinate interdependent activities.