Organizational Structure and the Behavior of Firms: Implications for Integrated Assessment

30 Jun Organizational Structure and the Behavior of Firms: Implications for Integrated Assessment

“Organizational Structure and the Behavior of Firms: Implications for Integrated Assessment” (with Catherine Dibble and Keyvan Amir-Atefi) Climatic Change 48, 2001

Abstract

Existing climate/economy models typically treat production through the assumptions that firms maximize profits and that inputs are transformed to outputs according to a neoclassical production function. Yet these assumptions are at variance with some of the known empirical features of business behavior. One of the most promising ways to model firms more realistically is to include organizational network structure as an integral part of the representation. The firm’s optimization problem then includes not only the choice of inputs and outputs, but the choice of an organizational structure as well. This approach makes it possible to examine in a unified framework a number of issues pertaining to the internal workings of the firm: the consequences of multiple organizational objectives, the possible existence of productivity spillovers from one activity to another, and the algorithmic characteristics of procedural routines. Understanding how organizational structures influence overall performance is an important step towards better representing firms in integrated assessment models. Our results show that phenomena of the type characterizing the ‘Porter hypothesis’ (improved environmental performance without reduction in productivity or profitability) can appear even in very simple models of the firm, provided the effects of organizational structure are taken into account.