Organizations and Capabilities: The Role of Decompositions and Units of Selection

Abstract

"Organizations are first and foremost a decomposition. Out of the vast web of economic interrelationships, an extraordinarily small subset are given special salience. This subset is, for most legal and economic purposes, treated as a collective entity by its external environment. Payoffs, rewards and responsibilities, accrue to the collective entity. The payoff to particular subunits and individual actors within the organization is mediated by the collective's systems of allocation. Understanding the importance of organizations as a mechanism of resource allocation requires an understanding of the role of decompositions and alternative units of selection."