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Chapter XX
Interactions Between Formal
and Informal Organizational
Networks
Marco Lamieri
Institute for Scientifc Interchange Foundation, Italy
Diana Mangalagiu
Management and Strategy Department, Reims Management School, France
Institute for Scientifc Interchange Foundation, Italy
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AbstRAct
In this chapter we present a model of organization aimed to understand the effect of formal and informal
structures on the organization’s performance. The model considers the interplay between the formal
hierarchical structure and the social network connecting informally the agents emerging while the or-
ganization performs a task-set. The social network creation and evolution is endogenous, as it doesn’t
include any function supposed to optimize performance. After a review of the literature, we propose
a defnition of performance based on the effciency in allocating the task of a simulated organization
that can be considered as a network-based problem-solving system. We analyze how the emergence of
a stable process in decomposing tasks under different market conditions can alleviate the rigidity and
the ineffciencies of a hierarchical structure and we compare the performance of different hierarchical
structures under variable environment conditions.
IntRoductIon
The relation between the organizational architecture and performance has long been of concern to
economists (Sah & Stiglitz, 1986; Bolton & Dewatripont, 1994). Their emphasis has been on effciency,
defned as being optimal when interactions are minimized. Traditional economics sees interactions