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Reinventing The Hierarchy, The Case Of The Shell Chemicals Carve-Out

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Author Info
Spekle, R.F.
Bogaard, M.A. van den (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
Abstract

This paper reports on a major portfolio restructuring at Shell. The restructuring involved the divestment of a significant part of Shell?s highly integrated chemical business. We study this event and -particularly- the related control issues, using Transaction Cost Economics (TCE) as our basic frame of reference. Our analysis shows that many of the problems encountered by Shell in this process are strongly related to asset specificity and the need for adaptive mutual coordination and integration. In a situation in which asset specificity is high and where adaptive responses are important, TCE reasoning suggests internal (hierarchical) governance to prevail because of its superior ability to foster coordinated adaptation. Shell, however, opted for hybrid control. But our analysis demonstrates that the new, intendedly hybrid structure mimics the hierarchy in almost all fundamental respects, and that it functions in an intrinsically hierarchical way. These findings are in line with TCE, and our study provides an illustration of the relevance of TCE in making sense of control.

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Paper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam. in its series Research Paper with number ERS-2002-52-F&A Revision_Date: 2008-03-04.

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Date of creation: 04 Jun 2002
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Handle: RePEc:dgr:eureri:2002205

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Related research
Keywords: management control; transaction cost economics; case research;

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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.:
  1. Spicer, Barry H. & Ballew, Van, 1983. "Management accounting systems and the economics of internal organization," Accounting, Organizations and Society, Elsevier, vol. 8(1), pages 73-96, February. [Downloadable!] (restricted)
  2. Spekle, Roland F., 2001. "Explaining management control structure variety: a transaction cost economics perspective," Accounting, Organizations and Society, Elsevier, vol. 26(4-5), pages 419-441. [Downloadable!] (restricted)
  3. Dermer, Jerry, 1988. "Control and organizational order," Accounting, Organizations and Society, Elsevier, vol. 13(1), pages 25-36, January. [Downloadable!] (restricted)
  4. Baiman, Stanley & Rajan, Madhav V., 2002. "Incentive issues in inter-firm relationships," Accounting, Organizations and Society, Elsevier, vol. 27(3), pages 213-238, April. [Downloadable!] (restricted)
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