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Chapter Two: Forms of Hierarchy: The U-form and M-form
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There are an array of forms associated with functional and territorial modes of hierarchical organization. Applying the U-form and M-form to various political actors and processes in international politics allows the drawing of connections among political organizations usually considered disparate. In both the security and the economic spheres, a common set of organizational forms structure and order hierarchical interactions. Chapter will explore the organizational characteristics and causal effects of these organizational forms, but this chapter is concerned with identifying these organizational forms, applying them to various political settings, and demonstrating the conceptual advantages of thinking about political organization in these organizational terms versus using prevailing theories of hierarchy, especially power-based and identity-based approaches. O F M S The usual distinction made by the institutional literature in economics , in particular transaction-costs approaches, is between the contractual setting of the market and the hierarchical setting of the firm. Institutional economists such as Ronald Coase, Oliver Williamson, and Douglass North have examined the conditions under which economic agents bypass the market and organize their activity within the firm.1 - - . Douglass North, Institutions, Institutional Change and Economic Performance (New York: Cambridge University Press, ); Oliver Williamson, The Economic Institutions of Capitalism (New York: Free Press, ); Oliver Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, ); and Ronald Coase, “The Nature of the Firm,” Economica (): –. For a synthesis, see Thrainn Eggertsson, Economic Behavior and Institutions (New York: Cambridge University Press, ). . For a theoretical overview of various institutional forms and related governance issues, see Masahiko Aoki, Toward a Comparative Institutional Analysis (Cambridge: MIT Press, ). . Alfred D. Chandler Jr., and S. Salisbury, Pierre du Pont and the Making of the Modern Corporation (New York: Harper & Row, ); and Alfred D. Chandler Jr., Strategy and Structure : Chapters in the History of the American Industrial Enterprise (Cambridge: MIT Press, ). . See Williamson, The Economic Institutions of Capitalism; and Williamson, Markets and Hierarchies. . Williamson, Markets and Hierarchies, . Although the capitalist firm is often referred to as a uniformly hierarchical entity, firms themselves vary in their organizational structure. Beyond making decisions over what to produce, for whom and at what price, firms must also decide how to organize their various product lines and activities and how to optimally delegate multiple levels of managerial and administrative functions. The principle by which hierarchies are structured is an organizational form, and management scholars have identified several variants within the modern firm, such as networks, holding companies, and franchises.2 The enduring distinction among firms, however, remains whether to organize subordinate divisions by function or by product. Business historian Alfred Chandler first identified and formally distinguished between these two ideal types of firms—the unitary form and the multidivisional form.3 For Chandler, and later Oliver Williamson, the unitary form (U-form) is the most centralized or integrated type of firm and was the predominant form of early industrial organization (see fig. .).4 The U-form organizes the firm along functional lines as each operating division corresponds to a different function of the firm’s operations . Functions such as sales, engineering, manufacturing, and finance all maintain separate divisions that are directly subordinated to the central chief executive. The major operating and strategic decisions of the firm are formulated by the chief executive and transmitted to the managers of each functional division. In turn, division managers must maintain extensive horizontal ties with each other, as well as the executive , as they continuously coordinate and sequence their activities during the planning and production processes. Within this organizational structure , an expansion of the firm adds increasing levels of management within the overall structure of these functionally differentiated divisions.5 Now consider the structural characteristics of the multidivisional firm (M-form, see fig. .). Unlike the U-form, subordinate operating . Ibid., . . Chandler, Strategy and Structure. Also see Chandler, The Visible Hand: The Managerial Revolution in American Business (Cambridge: Harvard University Press, ). . For examples, see John Cable and Manfred Dirrheimer, “Hierarchies and Markets: An Empirical Test of the Multidivisional Hypothesis in West Germany,” International Journal of Industrial Organization (): –; and John Cable and Hirohiko Yasuki, “Internal Organisation , Business Groups and Corporate Performance: An Empirical Test of the Multidivisional Hypothesis in Japan,” International Journal of Industrial Organization (): –. See also Williamson, Economic Institutions of Capitalism; Williamson, Markets and Hierarchies; and Chandler, Strategy and Structure. divisions do not correspond to the separate functions of the firm; instead, the subdivisions are differentiated by product or geography and are responsible for a wide range of functions.6 Within each of these quasi-autonomous...
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