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Overt Interfunctional Conflict (and its Reduction Through Business Strategy)

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  • Julio J. Rotemberg
  • Garth Saloner

Abstract

We study why production and sales departments tend to disagree, with the former wanting long production runs and the latter wanting a broad product line. We then analyze why these disagreements lead to overt conflict in which functional areas fight with each other by presenting arguments that damage each other's position. We show how the firm benefits from the information generated by this conflict. In spite of these benefits, the equilibrium conflict can exceed its profit-maximizing level. Finally, we show that concentrating innovative talent in only one department can help reduce interfunctional conflict.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 26 (1995)
Issue (Month): 4 (Winter)
Pages: 630-653

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Handle: RePEc:rje:randje:v:26:y:1995:i:winter:p:630-653

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Cited by:
  1. Sandeep Baliga, 2000. "Optimal Design of Peer Review and Self-Assessment Schemes," Econometric Society World Congress 2000 Contributed Papers 1516, Econometric Society.
  2. Mark J. Zbaracki & Mark Bergen & Daniel Levy, 2006. "The Anatomy of a Price Cut: Discovering Organizational Sources of the Costs of Price Adjustment," Working Papers 2006-3, Department of Economics, Bar-Ilan University.
  3. Klaas J. Beniers & Robert A.J. Dur & Otto H. Swank, 2002. "Sequential Advocacy," Tinbergen Institute Discussion Papers 02-016/1, Tinbergen Institute, revised 10 Jun 2003.
  4. Jeremy C. Stein, 2000. "Information Production and Capital Allocation: Decentralized vs. Hierarchical Firms," NBER Working Papers 7705, National Bureau of Economic Research, Inc.
  5. Juan D. Carrillo & Denis Gromb, 2005. "Culture in Organizations: Inertia and Uniformity," Levine's Bibliography 172782000000000053, UCLA Department of Economics.
  6. Fosfuri, Andrea & Rønde, Thomas, 2009. "Leveraging resistance to change and the skunk works model of innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 274-289, October.

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