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Ronald Coase, in the Coasean theory, sought to describe the effectiveness of an economic allocation, or to study outcomes when faced with externalities. If there is a possibility of trade taking place in the presence of externalities and the absence of transaction costs, bargaining will result to a favorable outcome, the initial allocation of property rights notwithstanding (Coase, 1990). This theory seeks to resolve externality problems in the absence of transaction costs. In the theory, there is reference to the Coasean ceiling, which is the optimum point for transaction costs of managing a standard institutional form.
Above this point the transactional costs cannot work well. There is also reference to the Coasean floor, which is the lowest point at which transactional costs cannot work appropriately. At the Coasean floor the transactional costs of any type of activity, regardless of how valuable it may be, are very high for an organization to pursue. Activities that are improved or enabled by social tool can be taken as a kind of a ladder, with the rungs, in order of difficulty, being sharing, cooperation and collective action (Coase, 1990).
Social tools, such as Facebook and twitter play a huge role in reducing transaction costs, and this allows loosely structured groups which have limited managerial oversight to operate beneath the Coasean floor. A good example is Flickr, an online networking site which enables groups to form organically around themes of images without incurring the transactional costs of managerial oversight (Shirky, 2008).
Online networking tools as well as online collaboration platforms nowadays support group actions and group conversations in a fast unique way that could not be previously achieved through institutions. Print media has nowadays resulted to an increase in individual expression, and telephones, particularly mobile telephones have increased communication between people, making it faster. These new communication tools have made it possible for groups to be forming without the previous barricades of time and cost, and this subsequently makes organization easier. The creation of successful online groups, however, relies heavily on an effective fusion of an attainable promise, an acceptable bargain and an effective tool.
An attainable promise defines the reasons why someone would join a group. The founder should make the steps to joining the group easy, as well as subdividing the community and ensure that the interests of everyone are addressed. The group founder must make sure that there are effective tools to ensure all challenges that can hinder the coordination of the group are overcome easily. An acceptable bargain defines what one should expect when joining the group as well as what is expected of them after joining the group (Coase, 1990). All these are the ingredients that make up a successful online group.
When joining the particular group, one is required to adhere to the requirements of the ladder of coordination, to ensure the group is a success. All members should be prepared to share in organizational ideas that can make the group grow both in size and performance. All the members must be cooperative, and be ready to follow instructions, and accept roles as they are dished out to them. Collective action as well as collective responsibility is an ingredient that must be present in all successful groups. All members must work together towards a common goal, and when decisions backfire, they must all be ready to take responsibility collectively.
The advent of new, improved technology and social media offers a new, exciting dimension, as it provides the tools for organization, but leaves it to the users to group themselves. An example of such an artifact is Flickr. Flickr is a popular online tool that is used to compile photos and videos by people by use of tags. Previously, way before Flickr came into being; both professional and amateur photographers would collect at parades annual and events to take photographs. The costs for an individual or even an organization to assemble all the photos and group them for all to see would be too high. These photos would thereby go unseen by most of the people in the parade or event, rendering them useless as only the photographer and those close to him could access them (Shirky, 2008).
Then along came Flickr, the perfect solution for this problem. Flickr is a web based photo designing application that has taken the corporate world by storm. This tool enables users, both amateur and professional, using digital and phone cameras to upload the pictures of an event, and link the photos with others of the same topic or event with a tag. A tag is a form of metadata which will allow a user to type in a word, and this brings out results of photos related to that particular word. Due to the lack of management required, the costs of hosting such an artifact are low enough to allow for its existence.
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The advent of new technology has led to the enabling of previously nonexistent organizational features as well as improvement of features that were previously cumbersome to use. The online networking sites and web platforms that are used today have come to reduce transaction costs, and this brings more appeal to institutions, which use them at lower costs and maximum effectiveness. Administration values are also enhanced, as no supervision is requires while using online networking sites and web platforms, as opposed to physical groups convened at specific places.