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How to Get What You Want When You Do Not Know What You Want: A Model of Incentives, Organizational Structure, and Learning

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  • Luigi Marengo

    (Laboratory for Economics and Management, Istituto di Economia, Scuola Superiore Sant' Anna, 56127 Pisa, Italy)

  • Corrado Pasquali

    (Dipartimento di Scienze Giurdiche nella Società e nella Storia, Università di Teramo, 64100 Teramo, Italy)

Abstract

In this paper we present a model of the interplay among learning, managerial intervention, and the allocation of decision rights in the context of a generalized agency problem. Within this context, actors face not only conflicting interests but also diverging cognitive “visions” of the right course of action. We assume that a principal may obtain the implementation of desired organizational policies by means of appropriate design of the allocation of decisions or by means of costly intervention through authority or incentives, and we analyze their consequences for organizational control and learning. We show that the structure of allocation of decision rights is very powerful in terms of control, but when the principal is uncertain about the course of action, organizational structure and managerial intervention complement each other in nontrivial ways and must be carefully tuned. We also show that there is a general advantage in maximizing the partitioning decision rights, because it allows both higher control and higher levels of learning.

Suggested Citation

  • Luigi Marengo & Corrado Pasquali, 2012. "How to Get What You Want When You Do Not Know What You Want: A Model of Incentives, Organizational Structure, and Learning," Organization Science, INFORMS, vol. 23(5), pages 1298-1310, October.
    • Handle: RePEc:inm:ororsc:v:23:y:2012:i:5:p:1298-1310
    DOI: 10.1287/orsc.1110.0705
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    References listed on IDEAS

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    Cited by:

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    3. Alfonso Gambardella & Martin Ganco & Florence Honoré, 2015. "Using What You Know: Patented Knowledge in Incumbent Firms and Employee Entrepreneurship," Organization Science, INFORMS, vol. 26(2), pages 456-474, April.
    4. Giovanni Dosi & Marco Faillo & Virginia Cecchini Manara & Luigi Marengo & Daniele Moschella, 2017. "The formalization of organizational capabilities and learning: results and challenges," LEM Papers Series 2017/08, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    5. Scott C. Ganz, 2018. "Ignorant Decision Making and Educated Inertia: Some Political Pathologies of Organizational Learning," Organization Science, INFORMS, vol. 29(1), pages 39-57, February.
    6. Simona Settepanella & Gennaro Amendola & Luigi Marengo & Connor Minto, 2022. "Divide and conquer: the engineering of delegation," Computational Management Science, Springer, vol. 19(4), pages 605-626, October.

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