Influence Activities and Strategic Coordination: Two Distinctions of Internal and External Markets
AbstractThis paper examines empirically two distinctions of internal and external markets: influence activities and strategic coordination. Influence activities that arise from decentralization, imperfect monitoring, and a relative performance system are a potential liability of internal markets, coordination may be worse in internal markets than in external markets. However, strategic coordination is an advantage of internal markets, a hierarchy can more effectively implement strategic policies in internal markets than external markets. The results of this study show that profit center managers engage in influence activities by haggling over price adjustments, causing greater renegotiation costs in internal markets than in comparable external markets. However, implementation of cost reduction, which is a strategic policy, appears to be more effective in internal markets the results show that supplying profit centers disclose more private cost information than external market suppliers. Thus cooperation and competition appear to operate simultaneously in internal markets. In addition, the results suggest that internal markets appear to undermine one advantage of a vertical integration strategy the creation of unique assets, as organizational resource that can generate rents. These results, which are based on data gathered from the internal and external markets of one Fortune 100 company, are exploratory and further work is needed to generalize the findings.
Download InfoIf 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.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 41 (1995)
Issue (Month): 12 (December)
comparative institutional performance; transaction costs; multidivisional corporation; hybrid organizations; influence activities;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Milorad M. Novicevic & M. Ronald Buckley & Michael G. Harvey, 2000. "The Changing Role of Managers within the Supply Chain Networks: Theory and Practical Implications," American Journal of Business, Emerald Group Publishing, vol. 15(2), pages 33-42.
- Lazzarini, Sergio G. & Mesquita, Luiz F. & Claro, Danny P., 2007. "Buyer-Supplier and Supplier-Supplier Alliances: Do They Reinforce or Undermine One Another?," Insper Working Papers wpe_84, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
- Anderson, Shannon W. & Glenn, David & Sedatole, Karen L., 2000. "Sourcing parts of complex products: evidence on transactions costs, high-powered incentives and ex-post opportunism," Accounting, Organizations and Society, Elsevier, vol. 25(8), pages 723-749, November.
- Argyres, Nicholas S. & Liebeskind, Julia Porter, 2002. "Governance inseparability and the evolution of US biotechnology industry," Journal of Economic Behavior & Organization, Elsevier, vol. 47(2), pages 197-219, February.
- Gamal Atallah, 2002.
"Production Technology, Information Technology, and Vertical Integration Under Asymmetric Information,"
0203EClassification-JEL: , University of Ottawa, Department of Economics.
- Gamal Atallah, 2002. "Production Technology, Information Technology, and Vertical Integration under Asymmetric Information," CIRANO Working Papers 2002s-32, CIRANO.
- Mahoney, Joseph T. & McNally, Regina C., 2004. "Explaining and Predicting the Choice of Organizational Form: Integrating Performance Ambiguity and Asset Specificity Effects," Working Papers 04-0109, University of Illinois at Urbana-Champaign, College of Business.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.