Incentives, Information, and Organizational Form

@article{citeulike:2948616, 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 can be in encouraging a good performance. In particular, we show that, under certain 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.}, author = {Maskin, Eric and Qian, Yingyi and Xu, Chenggang}, citeulike-article-id = {2948616}, doi = {10.2307/2566987}, journal = {The Review of Economic Studies}, keywords = {agency, contract, information, institution, organization}, number = {2}, pages = {359--378}, posted-at = {2008-07-01 16:20:22}, priority = {4}, publisher = {The Review of Economic Studies Ltd.}, title = {Incentives, Information, and Organizational Form}, url = {http://dx.doi.org/10.2307/2566987}, volume = {67}, year = {2000} }

TY - JOUR ID - citeulike:2948616 L3 - citeulike-article-id:2948616 N2 - 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 can be in encouraging a good performance. In particular, we show that, under certain 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. IS - 2 JF - The Review of Economic Studies EP - 378 TI - Incentives, Information, and Organizational Form PB - The Review of Economic Studies Ltd. VL - 67 SP - 359 KW - agency KW - contract KW - information KW - institution KW - organization AU - Maskin, Eric AU - Qian, Yingyi AU - Xu, Chenggang PY - 2000/// UR - http://dx.doi.org/10.2307/2566987 ER -