The study explores how a market-like organizational system realizes efficient and/or effective development by investigating the efficiency/effectiveness trade-off in micro-level exchanges.
The study is motivated by two principles: reciprocity and similarity. Reciprocal benefits drive exchanges. Accordingly, two agents for a potential exchange should have different resources. However, differences in resources usually cause lack of trust, which hinders the efficient occurrence of exchanges. Alternatively, if two parties have similar resource positions, they can conduct an exchange efficiently. Nevertheless, the similarity makes the exchange less effective. Therefore, an efficiency/effectiveness trade-off exists in micro-level exchanges. To understand how different focuses on the efficiency/effectiveness trade-off shape the macro-level performance, the author develops a complex adaptive systems model for computer simulations.
The author finds that an efficiency-focus institution facilitates a market-like organizational system's rapid emergence but hinders the system's effective development.
The study develops a model of how a dyadic exchange happens (or not) between any two parties in a competitive and uncertain environment and how the micro-level exchanges aggregate, suggesting one specific way to understand the micro-to-macro process of a market-like organizational system's economic dynamism. Future research is expected to improve the model with different contingencies.
The study's findings suggest that the efficiency-focus institution and the effectiveness-focus institution should be used at different times in a market-like organizational system's development process.
The study investigates the macro-level consequences building upon the micro-level efficiency/effectiveness trade-off.
