Bureaucratic Limits of Firm Size: Empirical Analysis Using Transaction Cost Economics

Canback, Staffan

doi:10.2139/ssrn.2429984

Cited by 10 publications

(8 citation statements)

References 114 publications

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“…Canback [2002] used data from more than 700 large U.S. manufacturing firms to confirm his hypothesis that bureaucratic failure increases with firm size and has a negative impact on firm performance. Round [1975], in the earlier-cited study of Australian manufacturing firms that verified the existence of economies of scale in many industries, also found that many of these industries had a maximum optimal firm size, so that firms incur significantly higher costs per unit when they operate beyond this optimal size.…”

Section: Limits To Economies Of Scalementioning

confidence: 99%

Does Size Matter? Economies Of Scale In The Banking Industry

Stimpert

Laux

2011

JBER

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Section: Limits To Economies Of Scalementioning

confidence: 99%

Does Size Matter? Economies Of Scale In The Banking Industry

Stimpert

Laux

2011

JBER

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“…However, in recent years, growth through integration is increasingly viewed as a high‐risk and economically unattractive strategy, as firms experience demand fluctuations and market fragmentation (Child, ; Riordan and Williamson, ). It is also increasingly recognized that there are limits to firm size, which can offset returns to scale and trigger the diseconomies of scale arising from employee alienation, dysfunctional employee relations, coordination lapses, information delays, compounding of errors, and bottlenecks (Arrow, ; Blau and Meyer, ; Canbäck, ; Child, ; Riordan and Williamson, ; Williamson, ).…”

Section: Knowledge Economy and Firm Disaggregationmentioning

confidence: 99%

“…With a high degree of asset integration, the fixed costs and investment risk increase immensely, whereas combining all business operations into one or a few locations results in asset concentration, which in turn increases organizational complexity and bureaucratic cost (Chandler, ; Williamson, ). Moreover, larger the organization, less responsive it becomes to dynamic markets that require continuous product or technology variations (Adler, ; Canbäck, ; Tushman and Anderson, ). In large firms, organizational change faces inherent resistance, because (i) the change has to be system wide because of high asset integration, (ii) the cost of change is very high, and (iii) as the hierarchical distance between top management and business operations widens, managerial responses are belated (Williamson, ).…”

Section: Review Of Modern Organization and Productionmentioning

confidence: 99%

Shoaling (School of Fish) As Competitive Strategy

Muthusamy

2015

Strategic Change

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A s firms are witnessing uncertain business conditions and more thrust is being given to agility, speed, and market responsiveness rather than scale and size, operating in a shoaling form is a desired strategy across many industries.Managers of established firms as well as those of emerging industry challengers continually seek new strategies that ensure better returns with minimal risk. While incumbent industry leaders struggle to sustain innovativeness and market responsiveness with firm size built to primarily secure cost advantages, emerging industry challengers search for innovations to break industry barriers. A 'shoaling strategy' (also referred to as disaggregation here), that will enable firms to operate in a synchronized manner like a school of fish to concurrently achieve scale economies as well as market responsiveness is proposed in this article. Shoaling strategy, on the one hand, reduces the opportunity cost of not exploiting emerging market opportunities and, on the other hand, reduces the investment risk that accrues due to large-scale integration.There is a traditional saying in business that 'big fish eats small fish,' which suggests that a firm's large scale will ensure higher returns and competitive advantage over rivals. A shoaling strategy, on the contrary, challenges this notion with the contention that 'quick fish -albeit smaller -can eat large fish.' The main premise of this argument is that a shoaling strategy (school of fish) to organize the value chain will be the most effective way to accomplish competitive advantage without large-scale investment commitment.'Small is beautiful,' argued Schumacher (1973) while proposing an aesthetic and humanistic approach for designing economic, business, and production systems. With a similar rationale, it is suggested that the small scale has emerged into an alternative paradigm for building efficient, innovative, and dynamic models of business. Recent studies attest to this phenomenon, indicating the emergence of knowledge-centered global enterprises operating as 'dispersed network[s] of smaller units' and large firms being disaggregated and their boundaries becoming shrunk and permeable (Birch, 1987;Contractor et al., 2010; 1 JEL classification codes: B20, D23, D24, L22, L23, M11, M21.Shoaling can be considered a unique business strategy, because it enables a large firm to operate with the nimbleness of a smaller firm or it can allow small firms to effectively rally their resources against large rivals.A shoaling strategy, on the one hand, reduces the opportunity cost of not exploiting emerging market opportunities and, on the other hand, reduces the investment risk that accrues due to large-scale integration.A shoaling form enables multipronged competitive strategies, permitting a firm to develop unique or optimal strategy for each rival it encounters in the respective market or region.

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“…In turn, this is a crucial factor of a firm's competitiveness, survival, and profitability, being also a mitigating factor for diseconomies of scale (Canback 2002). Therefore, it is natural that firms protect specific knowledge as a valuable asset, in particular, that part of their specific knowledge that has become syntactical knowledge or that can be recreated easily by others through copying or reverse engineering.…”

Section: The Prospects Of Open Design For the Evolution Of Manufacturmentioning

confidence: 99%

Open design and knowledge integration in semiotic manufacturing integration

Garrido

2010

International Journal of Computer Integrated Manufacturing

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The purpose of this paper is to analyse Open Design from a perspective of knowledge integration in semiotic manufacturing integration. It proposes a framework for analysis based on the idea of distinguishing syntactical knowledge from semantic and pragmatic knowledge, as a conceptual tool to assess the issues involved. It reviews Free Software and Open Source Software as the origins of Open Design, and presents a brief survey of the current expression of Open Design in the Web. It analyses prospects for manufacturing integration set forth by Open Design at the inter-enterprise and market levels.

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Bureaucratic Limits of Firm Size: Empirical Analysis Using Transaction Cost Economics

Cited by 10 publications

References 114 publications

Does Size Matter? Economies Of Scale In The Banking Industry

Does Size Matter? Economies Of Scale In The Banking Industry

Shoaling (School of Fish) As Competitive Strategy

Open design and knowledge integration in semiotic manufacturing integration

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