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A MULTI-TASK PRINCIPAL-AGENT APPROACH TO ORGANIZATIONAL FORM*

BESANKO, DAVID and REGIBEAU, PIERRE and ROCKETT, KATHARINE E (2005) 'A MULTI-TASK PRINCIPAL-AGENT APPROACH TO ORGANIZATIONAL FORM*.' Journal of Industrial Economics, 53 (4). pp. 437-467. ISSN 0022-1821

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Abstract

This paper studies the choice of organizational forms in a multi-task principal-agent model. We compare a functional organization in which the firm is organized into functional departments such as marketing and R&D to a product-based organization in which the firm is organized into product lines. Managers' compensation can be based on noisy measures of product-line profits. Measures of a functional area's contribution to total profits are not available, however. This effect favors the product organization. However, if there are significant asymmetries between functional area contributions to organizational success and cross-product externalities within functions, organizing along functional lines may dominate the product organization. The functional organization can also dominate when a function is characterized by strong externalities while the other is not. © Blackwell Publishing Ltd. 2005.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Economics, Department of
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 12 Jul 2012 11:51
Last Modified: 15 Jan 2022 00:35
URI: http://repository.essex.ac.uk/id/eprint/2841

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