AbstractThis paper attempts to explain organization structure based on optimal coordination of interactions among activities. The main idea is that each manager is capable of detecting and coordinating interactions only within his limited area of expertise. Only the CEO can coordinate company wide interactions. The optimal design of the organization trades off the costs and benefits of various configurations of managers. Our results consist of classifying the characteristics of activities and managerial costs that lead to the matrix organization, the functional hierarchy, the divisional hierarchy, or a fiat hierarchy. We also investigate the effect of changing the costs of various managers on the nature of the optimal organization, including the extent of centralization.
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 InfoPaper provided by Center for Research in Security Prices, Graduate School of Business, University of Chicago in its series CRSP working papers with number 499.
Date of creation: Jul 1999
Date of revision:
Contact details of provider:
Postal: 725 South Wells Street, Suite 800, Chicago, Illinois 60607-4501
Web page: http://gsbwww.uchicago.edu/fac/finance/papers/
More information through EDIRC
Other versions of this item:
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.:
- Mathias Dewatripont & Patrick Bolton, 1996.
"The firm as a communication network,"
ULB Institutional Repository
2013/9597, ULB -- Universite Libre de Bruxelles.
- Mathias Dewatripont & Patrick Bolton, 2004. "The firm as a communication network," ULB Institutional Repository 2013/9599, ULB -- Universite Libre de Bruxelles.
- Mathias Dewatripont & Patrick Bolton, 1994. "The firm as a communication network," ULB Institutional Repository 2013/9595, ULB -- Universite Libre de Bruxelles.
- Oliver Hart & John Moore, 2005.
"On the Design of Hierarchies: Coordination versus Specialization,"
Journal of Political Economy,
University of Chicago Press, vol. 113(4), pages 675-702, August.
- Hart, Oliver D. & Moore, John, 2005. "On the Design of Hierarchies: Coordination Versus Specialization," Scholarly Articles 3448676, Harvard University Department of Economics.
- Oliver Hart & John Moore, 1999. "On the Design of Hierarchies: Coordination Versus Specialization," NBER Working Papers 7388, National Bureau of Economic Research, Inc.
- 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.
- Oliver Hart & John Moore, 1999. "On the Design of Hierarchies: Coordination Versus Specialization," Harvard Institute of Economic Research Working Papers 1880, Harvard - Institute of Economic Research.
- Oliver Hart & John Moore, 2004. "On the Design of Hierarchies: Coordination versus Specialization," ESE Discussion Papers 117, Edinburgh School of Economics, University of Edinburgh.
- Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September.
- Singh, Nirvikar, 1985. "Monitoring and Hierarchies: The Marginal Value of Information in a Principal-Agent Model," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 599-609, June.
- Oliver Hart & John Moore, 1999. "On the design of hierarchies: coordination versus specialization," LSE Research Online Documents on Economics 19340, London School of Economics and Political Science, LSE Library.
- Sah, Raaj Kumar & Stiglitz, Joseph E, 1986.
"The Architecture of Economic Systems: Hierarchies and Polyarchies,"
American Economic Review,
American Economic Association, vol. 76(4), pages 716-27, September.
- Raaj Kumar Sah & Joseph E. Stiglitz, 1984. "The Architecture of Economic Systems: Hierarchies and Polyarchies," NBER Working Papers 1334, National Bureau of Economic Research, Inc.
- Calvo, Guillermo A & Wellisz, Stanislaw, 1979. "Hierarchy, Ability, and Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 991-1010, October.
- Qian, Yingyi, 1994. "Incentives and Loss of Control in an Optimal Hierarchy," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 527-44, July.
- Moreira, Humberto Ataíde & Costa, Cristiano Machado & Ferreira, Daniel Bernardo Soares, 2004.
"Biased managers, organizational design, and incentive provision,"
Economics Working Papers (Ensaios Economicos da EPGE)
525, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Costa, Cristiano M. & Ferreira, Daniel & Moreira, Humberto, 2005. "Biased managers, organizational design, and incentive provision," Economics Letters, Elsevier, vol. 86(3), pages 379-385, March.
- Carroll, Timothy N. & Hunter, Starling D., 2006. "Organizational Design, Organizational Learning, And The Market Value Of The Firm," Working papers 30608, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Chi, Tailan & Nystrom, Paul C. & Kircher, Philipp, 2004. "Knowledge-based resources as determinants of MNC structure: tests of an integrative model," Journal of International Management, Elsevier, vol. 10(2), pages 219-238.
- Fabio Landini & Antonio Nicolò & Marco Piovesan, 2013. "The Hidden Cost of Specialization," IFRO Working Paper 2013/9, University of Copenhagen, Department of Food and Resource Economics.
- Inderst, Roman & Muller, Holger M. & Warneryd, Karl, 2007.
"Distributional conflict in organizations,"
European Economic Review,
Elsevier, vol. 51(2), pages 385-402, February.
- Andrea Patacconi, 2005. "Optimal Coordination in Hierarchies," Economics Series Working Papers 238, University of Oxford, Department of Economics.
- Jeremy C. Stein, 2000. "Information Production and Capital Allocation: Decentralized vs. Hierarchical Firms," NBER Working Papers 7705, National Bureau of Economic Research, Inc.
- M. Idriss GHODBANE, 2002. "Centralization Versus Decentralization in Credit Lending," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Wouter Dessein & Luis Garicano & Robert Gertner, 2010.
"Organizing for Synergies,"
American Economic Journal: Microeconomics,
American Economic Association, vol. 2(4), pages 77-114, November.
- Martin G. Kocher & Ganna Pogrebna & Matthias Sutter, . "The Determinants of Managerial Decisions Under Risk," Working Papers 2008-04, Faculty of Economics and Statistics, University of Innsbruck.
- Carlin, Bruce Ian & Chowdhry, Bhagwan & Garmaise, Mark J., 2012. "Investment in organization capital," Journal of Financial Intermediation, Elsevier, vol. 21(2), pages 268-286.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If references are entirely missing, you can add them using this form.