Amir Ziv

Performance Measures and Optimal Organization

Abstract:
In this article, I explore the following issue: Can differences in the way firms are organized be explained in terms of the underlying information structures? Alternatively stated, what are the consequences of changes in the nature and precision of performance measures for the optimal firm structure, that is, the optimal number of workers and the resulting workers' contributions to the production process? Obviously, questions of organization structure are more complicated; hierarchical structure, decentralization issues, business integration questions, and more should be considered as well. Further, information structure is not the only variable that affects organization structure. It seems, however, that answering the above questions may improve our understanding of the nature of the firm, by demonstrating the incremental role that information technologies play in determining firm size.

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