Study On Labor Division And Coordination Cost

Since Coase's theory of transaction costs was proposed,it has been continuously developed for generations and is now widely used in the research on enterprise boundaries and organizational model.However,transaction cost theory cannot explain the appearance and change of some new organization models because it didn`t reach to a clear definition and constitute.This paper introduces the concept of coordination costs,and the purpose is to view the cost of economic activities at the perspective that the division of supply and demand need to be coordinated which causes price to pay.So this paper will draw a definition and get a detail constitute of coordination cost.Starting with labor division which is the origin of economics this paper studies the reason why labor division leads to the separation between supply and demand and studies the different kinds of separations which are separation in space,separation in time,separation in information,separation in quality,separation in quantity and separation in ownership.Based on that,this article researches the costs taken to coordinate these separations which are cost on transportation,cost on inventories,cost on risk reserve,cost on information and cost on negotiation,then studies the constitute of coordination costs and their relationship.Finally,through compare the coordination costs inside and among organizations,this paper draw a conclusion that coordination costs inside organizations are cheaper than those among organizations.