arXiv subjects

Jan van de Poll

Publications and source records attributed to Jan van de Poll.

2 recordsLinked to original sources

arXiv2026

Structural versus Allocative Inefficiency Across Organizational Settings

Organizations invest heavily in internal mechanisms such as incentive systems, governance structures, performance measurement, analytics, and repeated reorganizations. Yet realized performance gains are often weak or short-lived, particularly in large and mature organizations. Standard explanations emphasize allocative inefficiency arising from incentive misalignment, information problems, or bounded rationality. While relevant, these explanations struggle to account for environments in which effort is high, optimization capabilities are sophisticated, and aggregate performance remains far below apparent potential. This paper develops a theory of structural inefficiency inside organizations. The central mechanism is the presence of internal externalities: unpriced cross-effects of organizational mechanisms acting simultaneously on multiple performance objectives. When such effects are mixed in sign, organizational effort is partially canceled internally, creating a structural ceiling on realized performance. The paper introduces a simple representation of organizational primitives and key performance indicators and derives a realized-performance law in which internal conflict enters as a multiplicative discount factor. Under weak and realistic conditions, structural inefficiency dominates allocative inefficiency, explaining why optimization often fails before organizational coherence is restored.

econ.GN↗

arXiv2026

Unpriced Internal Externalities and Structural Inefficiency in Organizations

Organizations often invest substantial effort in improving internal mechanisms such as processes, governance, and technology, yet realize only modest performance gains. This paper proposes a structural explanation for this pattern. We introduce the concept of internal externalities: unpriced cross-effects generated by internal organizational mechanisms that act simultaneously on multiple objectives. When these effects oppose one another, effort cancels internally, limiting attainable performance even without incentive misalignment or informational constraints. We formalize this mechanism by modeling internal mechanisms as primitives that exert signed effects across performance objectives. This structure gives rise to internal conflict, a measurable property that captures the fraction of organizational activity lost to cancellation. We show that conflict constitutes a form of structural inefficiency that constrains the returns to effort and renders allocative optimization ineffective unless addressed first. The framework implies a natural sequencing of interventions, in which structural cleanup precedes effort reallocation and optimization. The analysis yields testable predictions and governance implications for how organizations should scale, constrain, redesign, or deprioritize internal mechanisms.

econ.GN↗