Shared rules cut coordination costs and attract more adopters

Evidence

Initially put forward in institutional economics (North, 1990), these effects relate to the heart of organizational functioning. They build on the benefits of rule-guided behavior: the more actors adopt and apply a specific institution (i.e., an organizational rule or routine), the more efficient the interaction among these actors is, since the behavior of the actors is rule guided and can therefore be anticipated and reactions can be considered in advance. Coordination costs can be significantly reduced. In consequence, it becomes more attractive to adopt these rules when other individuals also follow them. — Jörg Sydow, Georg Schreyögg, and Jochen Koch, Organizational Path Dependence, 78

Categorization

• DEFINE: Coordination effects are defined here precisely as the declining cost of interaction as more actors follow the same rule.