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Understanding managers' preferences for internal markets versus business planning: A comparative study of German and U.S. managers

  • Egelhoff, William
  • Frese, Erich
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    Internal markets and centralized business planning are alternative organizational designs for coordinating the economic activities within a firm. While some preliminary theory about when to use each exists in the literature, little is known about how managers understand and decide when to use one or the other. The study develops and tests in samples of German and U.S. managers a preliminary theory about factors that influence the preferences of managers for internal markets or planning as alternative modes of coordination. Managers' preferences are influenced by key constructs of internal markets and planning theory (the perceived limits of planning, speed and efficiency of markets, motivation potential of markets), but also by differences in their institutional contexts (national government and business context, company culture, and recent company experience with planning and internal markets). The study is the first to explore the substitutability of internal markets and planning within the strategic decision process of managers, closer to where it becomes reality.

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    Article provided by Elsevier in its journal Journal of International Management.

    Volume (Year): 15 (2009)
    Issue (Month): 1 (March)
    Pages: 77-91

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    Handle: RePEc:eee:intman:v:15:y:2009:i:1:p:77-91
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    1. Parkhe, Arvind, 2003. "Institutional environments, institutional change and international alliances," Journal of International Management, Elsevier, vol. 9(3), pages 305-316.
    2. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
    3. William G Egelhoff, 1984. "Patterns of Control in U.S., UK and European Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan, vol. 15(2), pages 73-83, June.
    4. Hans-Werner Sinn, 2009. "Can Germany Be Saved?: The Malaise of the World's First Welfare State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512602, June.
    5. Jerry Ellig, 2001. "Internal markets and the theory of the firm," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(4-5), pages 227-237.
    6. Ajzen, Icek, 1991. "The theory of planned behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 50(2), pages 179-211, December.
    7. V. K. Narayanan, 2005. "The Relevance of the Institutional Underpinnings of Porter's Five Forces Framework to Emerging Economies: An Epistemological Analysis," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 207-223, 01.
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