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Organizational Structure and Product Market Competition

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  • Jung Hur
  • Yohanes E. Riyanto

Abstract

This paper explores the link between delegation of authority and product market competition. It considers a firm that is contemplating entering a market served by an incumbent. The firm can adopt either a decentralized or a centralized authority structure. In the former, authority is delegated to an agent, while in the latter, it is retained by the principal. We address the questions of how the toughness of future product market competition affects the delegation decision, and how this decision in turn affects product market competition. The delegation decision is determined by a trade‐off between inducing the agent to take greater initiative and accepting lower operating profits from a less efficient decision taken by the agent.

Suggested Citation

  • Jung Hur & Yohanes E. Riyanto, 2012. "Organizational Structure and Product Market Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(3), pages 707-743, September.
    • Handle: RePEc:bla:jemstr:v:21:y:2012:i:3:p:707-743
    DOI: j.1530-9134.2012.00340.x
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    References listed on IDEAS

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