Two measures of organizational flexibility

Since the second half of the past century, increasingly flexible organizational forms are appearing among firms. However, while hierarchies are easily described, too few mathematical tools are available for flexible organizations. In this article, two measures are proposed in order to assess the state and trend of flexible organizations. The first of these measures is based on information waste, which occurs whenever information is classified into categories. The second measure is based on duplication of operations. The underlying idea is that firms have an endogenous drive towards organizational configurations where waste of information and duplication of operations are minimized. However, environmental uncertainty may require some flexibility, which is ensured by cognitive processes that discard some information as well as by parallel undertaking of similar actions. Both cognitive processes and parallel action are firm-specific features that only make sense within the knowledge-based view of the firm. However, in the special case where information waste and duplication of operations reach zero a firm can be described as an information processor, as contractualist views prescribe. JEL: D23, L20