Allocation of Rights and the Organization of Transactions: Elements of a Generative Approach to Organizing

This paper is an attempt to articulate in a systematicfashion how different patterns or forms of organizingare achieved and how one can talk about the variety inand the transformation of these forms. The paperargues that one way to address this fundamentalquestion is to look at how resources and rules can beused in transactions to develop a generative grammarof organizational forms. The theoretical perspectivedeveloped in the paper incorporates the nature ofinterdependencies among social actors in definingtheir relationships and the nature of resources beingtransacted in these relations. As a social system, anyorganizational form that involves regularizedrelations of interdependence between social actors,requires resources in some form or another. Whetherthey are characterized as goods transacted in anexchange situation, human or social capital of actorsin a productive act, or collective control ofproductive skills, they are the necessary componentsof organizing because they give the social actors thecapability to develop their strategic conduct. Inaddition to resources, any organizational form mustalso possess a set of rules that define the nature ofthe transaction among the social agents. The first part of the paper introduces the logic andthe elements of the generative grammar fororganizational forms. The second part applies theseideas to organizational governance structuresespecially the relationship between the owners and themanagers in order to show how different forms ofgovernance structures can be generated based on theallocation of rights among various parties involved. The paper concludes with the suggestion that marketsversus hierarchic governance are very grosscategorization that cannot satisfactorily show thediversity of variations in forms of governance inorganizations. Copyright Kluwer Academic Publishers 2000