American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Organizing for Synergies
American Economic Journal: Microeconomics
vol. 2,
no. 4, November 2010
(pp. 77–114)
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. (JEL D23, D86, G34, L22)Citation
Dessein, Wouter, Luis Garicano, and Robert Gertner. 2010. "Organizing for Synergies." American Economic Journal: Microeconomics, 2 (4): 77–114. DOI: 10.1257/mic.2.4.77Additional Materials
JEL Classification
- D23 Organizational Behavior; Transaction Costs; Property Rights
- D86 Economics of Contract: Theory
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- L22 Firm Organization and Market Structure
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