Advanced Search
MyIDEAS: Login to save this article or follow this journal

Distributional conflict in organizations

Contents:

Author Info

  • Inderst, Roman
  • Muller, Holger M.
  • Warneryd, Karl

Abstract

Hierarchy can function as an instrument to channel influence activities or power struggles in organizations. Contrary to what has frequently been argued, we show that multi-divisional organizations may involve lower influence costs than single-tier organizations, even though they offer more scope for organizational conflict and have more executives that can be influenced. These benefits derive from two effects. First, part of the conflict in multi-divisional organizations takes place on the division level, where a small number of agents fight over only a fraction of the overall prize. Second, by grouping agents into common divisions, multi-divisional organizations create free-rider problems in rent seeking. We apply our framework to divestitures and the transition from the U- to the M-form by US corporations in the 1920s.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V64-4JHMJ1H-1/2/7ab0e858c5872a04737d3b983a01a57b
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 51 (2007)
Issue (Month): 2 (February)
Pages: 385-402

as in new window
Handle: RePEc:eee:eecrev:v:51:y:2007:i:2:p:385-402

Contact details of provider:
Web page: http://www.elsevier.com/locate/eer

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Hyun-Han Shin & René M. Stulz, 1998. "Are Internal Capital Markets Efficient?," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 531-552, May.
  2. Oliver Hart & John Moore, 1999. "On the Design of Hierarchies: Coordination Versus Specialization," STICERD - Theoretical Economics Paper Series 375, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Harrington, Joseph Jr., 1999. "The Equilibrium Level of Rigidity in a Hierarchy," Games and Economic Behavior, Elsevier, vol. 28(2), pages 189-202, August.
  4. David S. Scharfstein & Jeremy C. Stein, 2000. "The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient Investment," Journal of Finance, American Finance Association, vol. 55(6), pages 2537-2564, December.
  5. Warneryd, Karl, 2001. "Replicating contests," Economics Letters, Elsevier, vol. 71(3), pages 323-327, June.
  6. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
  7. Yeon-Koo Che & Ian Gale, 1998. "Caps on Political Lobbying," Microeconomics 9809003, EconWPA.
  8. Raghuram Rajan & Henri Servaes & Luigi Zingales, . "The Cost of Diversity: The Diversification Discount and Inefficient Investment," CRSP working papers 357, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  9. Milton Harris & Artur Raviv, 2002. "Organization Design," Management Science, INFORMS, vol. 48(7), pages 852-865, July.
  10. Tullock, Gordon, 1975. "On the Efficient Organization of Trials," Kyklos, Wiley Blackwell, vol. 28(4), pages 745-62.
  11. Wärneryd, Karl, 1997. "Distributional Conflict and Jurisdictional Organization," Working Paper Series in Economics and Finance 173, Stockholm School of Economics.
  12. Meyer, Margaret A & Milgrom, Paul & Roberts, Donald John, 1992. "Organizational Prospects, Influence Costs, and Ownership Changes," CEPR Discussion Papers 665, C.E.P.R. Discussion Papers.
  13. Rajan, Raghuram G. & Zingales, Luigi, 2000. "The tyranny of inequality," Journal of Public Economics, Elsevier, vol. 76(3), pages 521-558, June.
  14. Inderst, Roman & Müller, Holger M. & Wärneryd, Karl, 2000. "Influence Costs and Hierarchy," Working Paper Series in Economics and Finance 392, Stockholm School of Economics.
  15. Milgrom, Paul & Roberts, John, 1987. "Bargaining and Influence Costs and the Organization of Economic Activity," Department of Economics, Working Paper Series qt32s7d4jv, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  16. Alfred D. Chandler, 1969. "Strategy and Structure: Chapters in the History of the American Industrial Enterprise," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530090, December.
  17. Skaperdas, Stergios, 1998. " On the Formation of Alliances in Conflict and Contests," Public Choice, Springer, vol. 96(1-2), pages 25-42, July.
  18. David S. Scharfstein, 1998. "The Dark Side of Internal Capital Markets II: Evidence from Diversified Conglomerates," NBER Working Papers 6352, National Bureau of Economic Research, Inc.
  19. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, vol. 7(2), pages 283-290.
  20. Paul R. Milgrom., 1987. "Employment Contracts, Influence Activities and Efficient Organization Design," Economics Working Papers 8741, University of California at Berkeley.
  21. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September.
  22. Müller, Holger M. & Wärneryd, Karl, 1999. "Inside vs Outside Ownership - A Political Theory of the Firm," Sonderforschungsbereich 504 Publications 99-82, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  23. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-39, September.
  24. Harrington, Joseph E, Jr, 1998. "The Social Selection of Flexible and Rigid Agents," American Economic Review, American Economic Association, vol. 88(1), pages 63-82, March.
  25. Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, vol. 25(1), pages 123-139, November.
  26. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
  27. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Felix Höffler & Sebastian Kranz, 2007. "Legal Unbundling can be a Golden Mean between Vertical Integration and Separation," Bonn Econ Discussion Papers bgse15_2007, University of Bonn, Germany.
  2. Felix Höffler & Sebastian Kranz, 2011. "Imperfect legal unbundling of monopolistic bottlenecks," Journal of Regulatory Economics, Springer, vol. 39(3), pages 273-292, June.
  3. Michael Beckmann & Matthias Kräkel, 2011. "Internal Rent Seeking, Works Councils, and Optimal Establishment Size," Working papers 2011/14, Faculty of Business and Economics - University of Basel.
  4. Johannes Münster & Klaas Staal, 2012. "How organizational structure can reduce rent-seeking," Public Choice, Springer, vol. 150(3), pages 579-594, March.
  5. Johannes Münster, 2009. "Group contest success functions," Economic Theory, Springer, vol. 41(2), pages 345-357, November.
  6. Hausken, Kjell, 2012. "On the inappropriateness of collective rent seeking analysis when agents exert within-group and between-group efforts," Economics Letters, Elsevier, vol. 116(3), pages 504-507.
  7. Kräkel, Matthias, 2006. "Firm Size, Economic Situation and Influence Activities," IZA Discussion Papers 2391, Institute for the Study of Labor (IZA).
  8. Dieter Bös, 2002. "Contests Among Bureaucrats," Bonn Econ Discussion Papers bgse27_2002, University of Bonn, Germany.
  9. Oliver Gürtler, 2010. "Haggling for Rents, Relational Contracts, and the Theory of the Firm," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 62(4), pages 359-377, October.
  10. Renucci, Antoine, 2008. "Access to financing, rents, and organization of the firm," Journal of Corporate Finance, Elsevier, vol. 14(4), pages 337-346, September.
  11. Wärneryd, Karl, 2013. "Common-value contests with asymmetric information," Economics Letters, Elsevier, vol. 120(3), pages 525-527.
  12. Kräkel, Matthias, 2006. "On the "Adverse Selection" of Organizations," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 168, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  13. Wärneryd, Karl, 2014. "Rent Seeking and Organizational Structure," Working Paper Series in Economics and Finance 749, Stockholm School of Economics.
  14. Aner Sela, 2002. "Contest Architecture (jointly with Benny Moldovanu)," Theory workshop papers 357966000000000088, UCLA Department of Economics.
  15. Antoine Renucci, 2008. "Access to financing, rents, and organization of the firm," Post-Print halshs-00365983, HAL.
  16. Sina Risse, 2011. "Two-stage group rent-seeking with negatively interdependent preferences," Public Choice, Springer, vol. 147(3), pages 259-276, June.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:51:y:2007:i:2:p:385-402. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.