Summary of the theory without your reactions
According to Barney & Ouchi (1986), there is much that organizational theorists can learn from the economics of organizations. These two theorists observe that what organizational theorists can learn from the economics of organizations has nothing in relation to the practical use of concepts or models. However, it is basically about organizations. It is about ways of analyzing organizations. The incorporation of lessons learnt from organizational economics into the theory of organizations is essential for is development. Therefore, the advice to the organizational theorists is that they need make consideration of the lessons from economics of organizations.
Importantly, there are three specific concepts involved in thinking based on the lessons from organizational economics. These three aspects have significant implications for the organizational theory if incorporated in its development. The first aspect of learning from organizational economics is equilibrium analysis. The second crucial aspect of organizational economics is transaction as the unit of analysis. Finally, there is the concept of organization.
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Barney & Ouchi (1986) observe that equilibrium thinking has got a bad reputation among the organizational theorists. The reason for this negative attitude towards it is that it is connected with the neoclassical price theory. The belief is that no organization is ever in the state of equilibrium, thus, the common choice of disregarding equilibrium reasoning. However, Barney & Ouchi (1986) feel it supposed to be incorporated in the organizational theory.
There is need of also considering the transaction, which is simply an exchange between entities that are technologically separated. Transactions would have a significant impact on the organizational theory if considered as a basis for analysis.
Finally, the concept of the organization is also of great significance in the development of the organizational theory as Barney & Ouchi (1986) ague. Organization, in this case, refers to the analysis of the structure and systems put in place within a given entity.
Conceptual critique of the theorist
The organizational economics theory was developed by Barney and Ouchi. It is vital to note that Jay Barney is a professor of American origin and works in the field of strategic management. He is renowned because of his worthwhile contributions to the resource-based theoretical perspective of gaining competitive advantage in an organization. His vast experience in this field of organizational management qualifies him to develop the theory of organizational economics.
Moreover, William Ouchi is also an American professor who largely deals in the field of business management and organization. Equally, his vast experience in the field of business and organizational management gives him the qualification to offer credible suggestions on the theory of organizational economics.
Personal critique
The postulations given by Barney & Ouchi (1986) in their recommendations to the organizational theorists would have deleterious implications on the theory of organizations hence should not be considered at all. Reasonably, the organizational economics aspects like equilibrium, transactions and concept of organization cannot fit in the traditional organizational theory. Specifically, there is the issue of the narrowness of the motivational model given within the organizational economics. The motivational model explained in this theory of organizational economics is biased against systems-level analysis as well as management.
Locate the theories in a historical context
Organizational theory has traditionally been set in a manner that makes it applicable in the real world. However, the organizational economics concepts of equilibrium, transactions and motivational models prompted some theorists and scholars to start thinking about the possibility of incorporating them in the traditional theory of the organization. Many organizational theorists have avoided incorporating the organizational economics in their theories of the organization because of its lack of pragmatism.
References
Barney, J. B., & Ouchi, W. G. (1986). Organizational economics . San Francisco: Jossey-Bass.
