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Organizing for Synergies

Wouter Dessein (), Luis Garicano () and Robert Gertner

American Economic Journal: Microeconomics, 2010, vol. 2, issue 4, 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)

JEL-codes: D23 D86 G34 L22 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/mic.2.4.77
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