Organizational Taxonomy Essay

1344 Words May 18th, 2013 6 Pages
Organizational Theory Taxonomy

Organizational Theory Taxonomy Title and Theorist Name | General Description | Example of Theory | Other Attributes | Agency Theory, Jensen & Meckling, 1972-1976 | The agency theory applies classical economic thinking to problems of organizational control and design (Tosi, 2009). Agency theory offers a useful way of understanding the complex authority relationship between top management and the board of directors. An agency relationship is when one personal “the principal” delegates decision-making authority or control to another “the agent” (Jones, 2010). | In 2005, Time Warner came under attack because top management had made many acquisitions such as AOL that did not led to increased innovation,
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| Transaction Cost Theory, Williamson, 1975 | The transaction cost theory shows how transaction costs, environmental certainty, and opportunities explain how organizations emerge to manage conditions where markets are not efficient in regulating mechanisms (Tosi, 2009). Transaction costs are defined as the costs of negotiating, monitoring, and governing exchanges between people. Transaction costs also occur when organizations exchange resources or information (Jones, 2010) | Health care is an example of how large transaction costs can be and the importance of reducing them. Over 40% of the U.S. healthcare budget is spent handling exchanges between doctors, hospitals, the government, insurance companies, and other parties. | Transaction cost theory consists of three governance modes: markets, internal organization, and a form of market contracting (Tosi, 2009). The goal of the organization is to minimize the costs of exchanging resources in the environment and the costs of managing exchanges inside the organization (Jones, 2010). HMOs were formed due to the desire to reduce transaction costs. | Resource dependence theory, Pfeffer & Salancik, 1978 | Organizations depend on their environment for the resources they need to survive and

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