Specific Knowledge and Divisional Performance Measurement

Michael C. Jensen () and William H. Meckling

Journal of Applied Corporate Finance, 2009, vol. 21, issue 2, pages 49-57

Abstract: This classic by the formulators of agency cost theory discusses five common divisional performance measurement methods-cost centers, revenue centers, profit centers, investment centers, and expense centers-while providing a theory that attempts to explain when each of these methods is likely to be the most efficient. The central insight of the theory is that each method offers a different way of aligning decision-making authority with valuable "specific knowledge" inside the organization. Copyright Copyright (c) 2009 Morgan Stanley.

Date: 2009

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Journal Article: SPECIFIC KNOWLEDGE AND DIVISIONAL PERFORMANCE MEASUREMENT (1999)
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