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Related Experiment Videos

Bringing the market inside.

Thomas W Malone1

  • 1MIT Sloan School of Management, Cambridge, Massachusetts, USA. malone@mit.edu

Harvard Business Review
|April 14, 2004
PubMed
Summary
This summary is machine-generated.

Internal markets leverage electronic communication to decentralize decision-making, enhancing business efficiency and flexibility. Companies can harness collective employee wisdom for better outcomes, as seen in emissions trading and sales forecasting.

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Area of Science:

  • Business Management
  • Organizational Behavior
  • Information Technology

Background:

  • The dot-com boom highlighted the potential of communication technologies for new business models, though initial optimism regarding speed was excessive.
  • Post dot-com bust, a rational re-evaluation of technology's gradual impact on business organization is warranted.
  • Internal markets represent a nascent organizational form enabled by new communication technologies.

Purpose of the Study:

  • To examine the concept of creating internal markets within companies.
  • To explore the benefits and potential risks associated with this new business organization model.
  • To understand how electronic technologies facilitate decentralized decision-making and information sharing.

Main Methods:

  • Analysis of emerging organizational structures that incorporate market mechanisms internally.

Related Experiment Videos

  • Case study examples illustrating the application of internal markets.
  • Examination of the role of electronic trading systems and information dissemination.

    • Main Results:

    • BP successfully reduced greenhouse gas emissions ahead of schedule using an internal electronic trading system for emissions permits.
    • Hewlett-Packard's internal futures market for sales predictions proved more accurate than official forecasts.
    • Electronic technologies enable widespread, low-cost information sharing, empowering employees to make informed, localized decisions.

    Conclusions:

    • Internal markets can introduce efficiency, flexibility, and motivation by decentralizing decision-making.
    • Leveraging collective employee wisdom through internal markets can benefit even large corporations.
    • The effective use of information technology is key to realizing the potential of internal market structures.