Why Organizations Fail: Models and Cases
Luis Garicano () and
Journal of Economic Literature, 2016, vol. 54, issue 1, 137-92
Organizations fail due to incentive problems (agents do not want to act in the organization's interests) and bounded rationality problems (agents do not have the necessary information to do so). This survey uses recent advances in organizational economics to illuminate organizational failures along these two dimensions. We combine reviews of the literature with simple models and case discussions. Specifically, we consider failures related to short-termism and the allocation of authority, both of which are instances of "multitasking problems"; communication failures in the presence of both soft and hard information due to incentive misalignments; resistance to change due to vested interests and rigid cultures; and failures related to the allocation of talent and miscommunication due to bounded rationality. We find that the organizational economics literature provides parsimonious explanations for a large range of economically significant failures. ( JEL D21, D23, D82, D83, M10)
JEL-codes: D21 D23 D82 D83 M10 (search for similar items in EconPapers)
Note: DOI: 10.1257/jel.54.1.137
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to AEA members and institutional subscribers.
Working Paper: Why organizations fail: models and cases (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aea:jeclit:v:54:y:2016:i:1:p:137-92
Ordering information: This journal article can be ordered from
Access Statistics for this article
Journal of Economic Literature is currently edited by Steven Durlauf
More articles in Journal of Economic Literature from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().