Work

Incentives, Information, and Organizational Form

Year: 2017

Type: book-chapter

Abstract: We model an organization as a hierarchy of managers erected on top of a technology (here consisting of a collection of plants). In our framework, the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him. We argue that different organizational forms give rise to different information about managers'performance and therefore differ according to how effective incentives canbe in encouraging a good performance. In particular, we show that, undercertain assumptions, the M-form (multi-divisional form) is likely to provide better incentives than the U-form (unitary form) because it promotes yardstick competition (i.e. relative performance evaluation) more effectively. We conclude by presenting evidence that the assumptions on which this comparison rests are satisfied for Chinese data.

Source: The MIT Press eBooks

DOI: 10.7551/mitpress/9780262534246.003.0012

Authors: Yingyi Qian, Eric S. Maskin, Chenggang Xu

Institutions: California Institute of Technology, Harvard University, Centre for Economic Policy Research, London School of Economics and Political Science, Stanford University, Tsinghua University, Princeton University, Massachusetts Institute of Technology, University of Hong Kong

Language: English

Topic: Accounting and Organizational Management

Subfield: Management Information Systems

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

Funders: National Science Foundation, Economic and Social Research Council

OpenAlex ID: W4241339008

FWCI: 18.76

Cites: 27

Cited by: 71

Related to: 10