Price, authority, ideology and rules: co-ordination mechanisms and co-ordination forms

Theories of co-ordination are partial and confuse mechanisms and forms. This paper suggests a theoretical integration based on New Institutional Economics (NIE) extended by contributions from Organisation theory. A distinction is made between co-ordination mechanisms, fundamental alternative options for obtaining coordination, and co-ordination forms, idealised descriptions of institutionalised coordination- solving devices in the economy. Co-ordination forms contain combinations of various mechanisms and one mechanism can occur in various forms. Four co-ordination mechanisms are identified; Price, Ideology, Authority and Rules. Price   refers to exchange between autonomous parties, Ideology to shared systems of values and beliefs, Authority to differences in rank and commands of a superior, and Rules refers to formal regulations and instructions. The choice of mechanisms is explained by contractual scale advantages, teamwork situations, asset specificity, transfer of knowledge, degrees of complexity, environmental stability and human motivation. The theory for price and authority is based on NIE, whereas the theory for rules and ideology is based on Organisation theory. The quadripolar set of four co-ordination mechanisms adds new perspectives to the theoretical analysis of market forms, as well as hierarchical forms and other forms. Finally, different forms are briefly analysed as combinations of these four mechanisms.