CES as an Organizational Production Function

The efficiency of an organization depends on the voluntary compliance of team members to organizational goals, mechanisms of coordination that can ensure cooperation and trust, and an appropriate allocation of capital and other resources. Managerial decisions can lead to synergies (i.e., increases in output for given inputs) even when decreasing returns to scale are discernible. However, neither possibilities of compliance nor managerial control can prevent organizational dissonance. This study argues that these features can be folded into a specification of the CES production function. For all practical purposes this is an important foundation for examining the stability of teams or spinoff from them and several other entrepreneurial activities that contribute to the productive efficiency of organizations.