Information Transmission Through Influence Activities

Chongwoo Choe and In-Uck Park

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: We study information transmission aspect of influence activities in an organization where privately informed division managers manipulate information about their divisional ‘state’ in order to sway the headquarters’ decision in their favor. We formalize a notion of informativeness of influence activities, which we show is equivalent to sharpening the headquarters inference on the underlying state in the sense of second-order stochastic dominance, thus enhancing its surplus. We then provide sufficient conditions for the influence activities to be necessarily informative (detrimental, resp.) in equilibrium; and conditions on what kind of changes may induce more informative influence activities. Applying these results to various cases in which managers are motivated differently, we find that more conducive to informative influence activities are organizations that are less averse to risk taking, that rely more on higher-powered incentives such as bonus, and promote suitably-designed competition such as internal promotion.

Keywords: influence activities; information transmission. (search for similar items in EconPapers)
JEL-codes: C72 D23 D82 L22 (search for similar items in EconPapers)
Pages: 28 pages.
Date: 2017-12-19
New Economics Papers: this item is included in nep-hrm and nep-mic
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Related works:
Working Paper: Information Transmission through Influence Activities (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:17/692

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