A New View of Organizations as Disequilibrium Systems

Abstract:     
In this paper we develop a new view of organizations as disequilibrium systems. To introduce our ideas and some terminology we use a simple economic model which captures the interaction of a firm with its output market. We demonstrate that the decisions made by the management might cause regular or chaotic evolutions of the firm's output, and that the latter gives inferior results in terms of long run performance measures. Furthermore, we show that the firm's management can stabilize and control chaotic dynamics by suitable interventions. After we have presented the main ideas, we proceed to give a description of organizations as disequilibrium systems which differs from the one presented in the literature. The firm’s evolution occurs on a chaotic attractor, which is neither the final nor the desired state from the management’s point of view due to inferior performance. The firm's management tries to guide the firm into a predetermined unstable state which is embedded in this chaotic attractor. If management is successful, the undesired fluctuations are effectively removed and performance is improved. As target states are shifted when structural parameters of the firm’s environment change, repeated interventions and adaptations of the organization are necessary.

Number of Pages in PDF File: 30

working papers series