INFORMATION-PROCESSING AND ORGANIZATIONAL-STRUCTURE

Standard economic theories of the firm land other organizations) stres s profit maximization as the foundation for derivation of predictable behavior. Yet statistical and case-study evidence continues to accumul ate that real firms do not act as required by the neoclassical framewo rk. Instead of being represented by ever more elaborate maximization m odels, the firm can be modeled simply as a network of information-proc essing agents. The actions of the firm are then a function only of the network structure and the information-processing capabilities of the agents. This approach can be used to explain a number of features of o rganizational behavior, including the process of technological diffusi on. It also suggests that derivation of the optimal organizational str ucture may be computationally complex, with a number of implications f or economic theory and policy development. (C) 1998 Elsevier Science B .V. All rights reserved.