8. Complexity and Coordination

Contrary to what is assumed in the romantic concept of complexity, complexity does not substitute for coordination. This chapter describes the different coordination mechanisms appropriate for the different levels of complexity. To achieve this first it is explained what coordination actually is and is to achieve. Despite being a core function of the firm, even explaining its existence vis-à-vis the market, no elaborated theory of coordination exists. A definition of coordination based on economic organization theory is presented in this chapter. The multiplicity of coordination mechanisms is arranged on two axes: imposed coordination versus self- (or horizontal) coordination, and implicit versus explicit coordination. The structure school of coordination used to be dominant in business administration but due to the declining costs of information the process school now is dominant. More in general, the decline of costs of information and the higher need for horizontal coordination implies a shift from the logic of structure to the logic of flow. As a consequence, in the manufacturing of complex products like airplanes the Bill of Material is the coordination mechanisms, creating a virtual organization over the conventional structure of suppliers and assembler. Second is introduced a taxonomy of levels of complexity. The highest level of complexity often is seen as the level of stigmergic coordination, as e.g. in the domain of social production. Stigmergic coordination is seen by many the form of self-coordination teams in business. However, the assumed free interaction between individuals as mode of coordination and innovation requires specific rules, a well-defined context, tolerance for narrative practices, as set out in the Interactive Theory.