Dynamic Coordination via Organizational Routines

49 Pages Posted: 7 Aug 2019

See all articles by Andreas Blume

Andreas Blume

University of Arizona - Department of Economics

April Franco

University of Toronto - Rotman School of Management; University of Toronto at Scarborough - Division of Management

Paul Heidhues

Heinrich Heine University Dusseldorf

Date Written: August 4, 2019

Abstract

The organizational behavior literature refers to persistent interaction patterns among members of an organization with distributed knowledge as organizational routines. To formalize this concept, as well as intuitions about organizational routines, we investigate dynamic coordination within a problem-solving team where team members can not communicate. Each team member has a finite number of actions. There is a single action profile with a positive payoff. The task is to identify that profile through repeated trials. For each of their actions, team members have private information regarding their confidence in that action being required for a solution. In this environment, we refer to deterministic sequences of action profiles, where actions are labeled according to their confidence ranking, as organizational routines. We show that there are equilibria that give rise to organizational routines. These organizational routine equilibria partially solve the team's coordination problem by synchronizing the team's search efforts. These organizational routine equilibria are resilient to changes in the environment by being ex post equilibria, to agents having only a coarse understanding of other agents' strategies by being fully cursed, and to natural forms of agents' overconfidence. If the distribution over team members' confidences is sufficiently dispersed, this resilience of organizational routine equilibria comes at the price of suboptimality. In contrast, generically, when this distribution is sufficiently concentrated, optimal equilibria induce organizational routines.

Keywords: Organizational routines, coordination, synchronization, teams

JEL Classification: C72, C73, D02, D23

Suggested Citation

Blume, Andreas and Franco, April and Heidhues, Paul, Dynamic Coordination via Organizational Routines (August 4, 2019). Available at SSRN: https://ssrn.com/abstract=3432062 or http://dx.doi.org/10.2139/ssrn.3432062

Andreas Blume (Contact Author)

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

April Franco

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

University of Toronto at Scarborough - Division of Management ( email )

1265 Military Trial
Scarborough, Ontario M1C 1A4
Canada

Paul Heidhues

Heinrich Heine University Dusseldorf

Universitätsstrasse 1
Duesseldorf, DE NRW 40225
Germany

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