Sequential analysis of organization design: A model and a case of Japanese firms

This paper deals with a design problem of an organization whose choice process of the task is formulated as a sequential decision process. This process incorporates the organization design as a combination of an organization structure anaa management system. Two organization structures, the pyramid organization and the matrix organization, are defined as the systems of task assignment. Two management systems, System 1 and System 2 are defined as the communication systems of the observation process on the environment. From a decision theoretic viewpoint, we analyze this organization design problem and obtain the results having the following managerial implications: The pyramid organization and System 1 are efficient under low uncertainty; the matrix organization and System 2 are efficient under high uncertainty; the pyramid organization is efficient if System 1 is efficient. Our empirical research on Japanese firms supports these implications.