Wouter Dessein

Organizing for Synergies

Coauthor(s): Luis Garicano, Robert Gertner.

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Abstract:
Large companies are usually organized into business units, yet some activities are almost always centralized in a company-wide functional unit. We first show that organizations endogenously create an incentive conflict between functional managers (who desire excessive standardization) and business-unit managers (who desire excessive local adaptation). We then study how the allocation of authority and tasks to functional and business-unit managers interacts with this endogenous incentive conflict. Our analysis generates testable implications for the likely success of mergers and for the organizational structure and incentives inside multidivisional firms.

Source: American Economic Journal: Microeconomics
Exact Citation:
Dessein, Wouter, Luis Garicano, and Robert Gertner. "Organizing for Synergies." American Economic Journal: Microeconomics 2, no. 4 (November 2010): 77-114.
Volume: 2
Number: 4
Pages: 77-114
Date: 11 2010