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Interaction Value Analysis: When Structured Communication Benefits Organizations

TitleInteraction Value Analysis: When Structured Communication Benefits Organizations
Publication TypeWorking Paper
Year of Publication2000
AuthorsNasrallah, WF, Levitt, RE, Glynn, P
Date Published12/2000
Publication Languageeng
KeywordsCenter for Integrated Facility Engineering, Centralization, CIFE, Communication, Firm Structure, Game Theory, Interaction Value Analysis, Organizational Contingency Theory, Queing Theory, Social Networks, Stanford University, Welfare Economics
AbstractWe present a mathematical model that explains and predicts the value that a management-defined communication structure can add to an organization composed of individuals with universal access to each other. We reduce the problem of optimizing organizational structure to a multiple-player non-cooperative game where players allocate the scarce resource of their attention among potential interaction partners. We investigate the conditions under which the game has a core - i.e., a confluence of individual optima (Nash equilibrium) that is also optimal for any cooperating coalition. Our interpretation is that business environments where these conditions exist do not benefit from strong management control of communication structure. We note that other combinations of conditions in this model fail to yield a core, even though a single stable Nash equilibrium does exist. The difference between aggregate effectiveness at the Nash equilibrium and the maximal feasible aggregate effectiveness is the value that management can provide through enforcing the globally optimum communication regime. The predictions of this simple model about the conditions that favor more or less structured communications agree surprisingly well with accepted organizational contingency theory.
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