Coordinating Tasks in M-Form and U-Form Organizations∗

We model the coordination of specialized tasks inside an organization as “attribute matching.” Using this method, we compare the performance of organizational forms (M-form and U-form) in implementing changes such as innovation and reform. In our framework, organizational forms affect the information structure of an organization and thus the way to coordinate changes. Compared to the U-form, the Mform organization achieves better coordination but suffers from less economies of scale. The distinctive advantage of the M-form is flexibility of experimentation, which allows the organization to introduce more innovation and reform. The theory is illustrated by the organizational differences between China and the Soviet Union and sheds light on their different reform strategies, with in particular the prevalence of the experimental approach in China. ∗We are grateful to Masahiko Aoki, Susan Athey, Patrick Bolton, Jacques Cremer, Mathias Dewatripont, Guido Friebel, Oliver Hart, Wei Li, Eric Maskin, Paul Milgrom, John Moore, John Roberts, Dani Rodrik, Jan Svejnar, Oliver Williamson, two anonymous referees, and seminar participants at Berkeley, LSE, Michigan, Stanford, Toulouse and the participants at the 1999 ESSET symposium in Gerzensee and at the Fifth Nobel Symposium in Economics in Stockholm for helpful discussions and comments. Roland and Xu benefitted from an ACE grant and Roland benefitted from a fellowship at the Center for Advanced Studies in Behavioral Sciences at Stanford. †Department of Economics, University of California, Berkeley, CA 94720-3880, U.S.A. E-mail: [email protected]. ‡Department of Economics, University of California, Berkeley, CA 94720-3880, U.S.A. E-mail: [email protected]. §Department of Economics, London School of Economics, London, WC2A 2AE, U.K. E-mail: [email protected].