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Exploring a market-like organizational system’s performance by considering the efficiency/effectiveness trade-off in micro-level exchanges

Lin Shi (Department of Management, Business School, Huaqiao University, Quanzhou, China)

Management Decision

ISSN: 0025-1747

Article publication date: 22 March 2022

Issue publication date: 17 January 2023




The study explores how a market-like organizational system realizes efficient and/or effective development by investigating the efficiency/effectiveness trade-off in micro-level exchanges.


The study is motivated by two principles: reciprocity and similarity. Reciprocal benefits drive exchanges. Accordingly, two agents for a potential exchange should have different resources. However, differences in resources usually cause lack of trust, which hinders the efficient occurrence of exchanges. Alternatively, if two parties have similar resource positions, they can conduct an exchange efficiently. Nevertheless, the similarity makes the exchange less effective. Therefore, an efficiency/effectiveness trade-off exists in micro-level exchanges. To understand how different focuses on the efficiency/effectiveness trade-off shape the macro-level performance, the author develops a complex adaptive systems model for computer simulations.


The author finds that an efficiency-focus institution facilitates a market-like organizational system's rapid emergence but hinders the system's effective development.

Research limitations/implications

The study develops a model of how a dyadic exchange happens (or not) between any two parties in a competitive and uncertain environment and how the micro-level exchanges aggregate, suggesting one specific way to understand the micro-to-macro process of a market-like organizational system's economic dynamism. Future research is expected to improve the model with different contingencies.

Practical implications

The study's findings suggest that the efficiency-focus institution and the effectiveness-focus institution should be used at different times in a market-like organizational system's development process.


The study investigates the macro-level consequences building upon the micro-level efficiency/effectiveness trade-off.



The study is supported by Huaqiao University’s Academic Project Supported by the Fundamental Research Funds for the Central Universities (21SKGC-QG09).

The author thanks Editor Brandon Randolph-Seng and Associate Editor Alejandra Marin for their guidance through the review process. The author is grateful for anonymous reviewers’ constructive comments and suggestions, which greatly helped to shape this work. The author also thanks Henrich Greve, Haibin Yang, Runtian Jing, Qiang Wu, reviewers, and participants of the Strategic Management Society (SMS) annual conference held in 2020 for their encouragement and support of developing the ideas that are at the core of this paper.


Shi, L. (2023), "Exploring a market-like organizational system’s performance by considering the efficiency/effectiveness trade-off in micro-level exchanges", Management Decision, Vol. 61 No. 1, pp. 269-289.



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