Abstract
AbstractThat governance within the firm is deliberate, conscious and hierarchical, based on authority is considered almost axiomatic. Chester Barnard is cited as an early theorist of this view. In this short article we review Barnard's original theory of authority, his later work and his private correspondence with F. A. Hayek, Michael Polanyi, Bertrand de Jouvenal and others. We show that Barnard focused in his later thinking less on authority and more on ‘responsibility’ and on the spontaneous nature of coordination within the firm, argued for ‘invisible hand’ explanations of coordination within the firm and compared coordination within the firm to market coordination. We use this information to produce novel insights into the work of Chester Barnard and also to demonstrate that his insights into the inner workings of firms is still not completely understood or reflected in the literature on the firm.
Highlights
If you don’t know the book I can certainly recommend it most highly. This seemed to be true of the organisation that he worked for, in a letter of 6 January 1956 that Barnard wrote to Hayek: Based upon my experience and observation I had arrived at conclusions consistent with yours before I had read any of your work or had heard of Michael Polanyi whose analysis of the situation, I think, is correct and very valuable, but it is not sufficient
Barnard did not articulate how coordination occurred in a spontaneous order – what was the mechanism by which such an order comes about? Instead that problem was solved by Hayek, who, profoundly influenced by Polanyi’s work on spontaneous orders, adopted the term (Hayek, 1960: 160) and demonstrated that such orders are created by individuals following common rules (Hayek, 1973: 49)
Hayek argued that a market order could exist because participants in that order followed common rules of behaviour; the market was a spontaneous order unintentionally created by individuals each using their own knowledge, limited, following common rules, to further their own ends (Hayek, 1973: 41ff); the ‘invisible hand’ is rule following
Summary
In his Nobel-prizewinning speech, Oliver Williamson made the distinction between coordination within firms and coordination in the market and generally expressed the current conventional view: Adaptations. The first point that Barnard emphasised in his later work, discussions and correspondence was an error that he felt had crept into organisational studies As he said to Wolf: In my opinion, the great weakness of my book is that it doesn’t deal adequately with the question of responsibility and its delegation. If you don’t know the book I can certainly recommend it most highly This seemed to be true of the organisation that he worked for, in a letter of 6 January 1956 that Barnard wrote to Hayek: Based upon my experience and observation I had arrived at conclusions consistent with yours before I had read any of your work or had heard of Michael Polanyi whose analysis of the situation, I think, is correct and very valuable, but it is not sufficient.
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
