Sunday, March 22, 2009

The Functions of the Executive: Chester Barnard and the Theory of Organization

I originally wrote this entry on August 10, 2004 and published it on

In my last semester at the Haas School of Business, I had the good fortunate of studying transaction cost economics (TCE) with the master: Oliver Williamson. He was a wonderful advisor, and although I had already read many of his essays, he guided my more extended readings and helped me gain a better understanding of the fundamental concepts of TCE. I started several ideas with him and finally settled on writing a paper that gave a transaction cost economics account of the bullwhip effect in supply chains. It was a fascinating exercise and learning experience. (Earlier on this weblog, I have written a brief account of the bullwhip effect, investigating it as a consequence of technological specialization and within the context of North's theories on the structual evolution of economic institutions.)

There was one book whose reading Williamson highly recommended to me: The Functions of the Executive by Chester Barnard. That book was first published in December of 1938. I have a copy of its 2002, 39th printing in my hands.

I've written about Chester Barnard and Oliver Williamson earlier, including a brief mention in a piece on Douglass North.

Today and possibly tomorrow, I'm going to extract a short summary of the first part of Barnard's book on The Functions of the Executive.

I think the material is important to anyone who works within a cooperative system, a business organization or any other kind of association.

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