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Internal Competition for Corporate Resources and Incentives in Teams

Author

Listed:
  • Anthony M. Marino

    () (University of Southern California)

  • Ján Zábojník

    () (University of Southern California)

Abstract

Invoking the free-rider problem in teams, many observers find profit sharing in large organizations puzzling, because it should have negligible incentive effects. We show that if a firm can be decomposed into two separate teams whose outputs can be observed, then profit sharing combined with competition between these two teams for internal resources frequently solves the free-rider problem. Using this result, we endogenize the firm's organizational structure and show that in the presence of economies of scale, small firms tend to organize as unitary firms, while large firms choose the multidivisional organizational form.

Suggested Citation

  • Anthony M. Marino & Ján Zábojník, 2004. "Internal Competition for Corporate Resources and Incentives in Teams," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 710-727, Winter.
  • Handle: RePEc:rje:randje:v:35:y:2004:4:p:710-727
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ishida, Junichiro, 2009. "Incentives in academics: Collaboration under weak complementarities," Labour Economics, Elsevier, vol. 16(2), pages 215-223, April.
    2. Benndorf, Volker & Rau, Holger A., 2012. "Competition in the workplace: An experimental investigation," DICE Discussion Papers 53, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Junichiro Ishida, 2013. "Multilayered Tournaments," ISER Discussion Paper 0879, Institute of Social and Economic Research, Osaka University.
    4. repec:wsi:ijimxx:v:21:y:2017:i:03:n:s1363919617500244 is not listed on IDEAS
    5. Sean P. Hargreaves Heap & Abhijit Ramalingam & Siddharth Ramalingam & Brock V. Stoddard, 2015. "‘Doggedness’ or ‘disengagement’? An experiment on the effect of inequality in endowment on behaviour in team competitions," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 13-08-R, School of Economics, University of East Anglia, Norwich, UK..
    6. repec:uea:wcbess:13-08 is not listed on IDEAS
    7. Schweisfurth, Tim & Zaggl, Michael A. & Schöttl, Claus P. & Raasch, Christina, 2017. "Hierarchical similarity biases in idea evaluation: A study in enterprise crowdfunding," Kiel Working Papers 2095, Kiel Institute for the World Economy (IfW).
    8. Hargreaves Heap, Shaun P. & Ramalingam, Abhijit & Ramalingam, Siddharth & Stoddard, Brock V., 2015. "‘Doggedness’ or ‘disengagement’? An experiment on the effect of inequality in endowment on behaviour in team competitions," Journal of Economic Behavior & Organization, Elsevier, vol. 120(C), pages 80-93.
    9. Lorens Imhof & Matthias Kräkel, 2016. "Ex post unbalanced tournaments," RAND Journal of Economics, RAND Corporation, vol. 47(1), pages 73-98, February.
    10. Cheng-Ping Chang & Chih-Ting Hsu & I-Jun Chen, 2013. "The relationship between the playfulness climate in the classroom and student creativity," Quality & Quantity: International Journal of Methodology, Springer, vol. 47(3), pages 1493-1510, April.
    11. Kräkel, Matthias, 2010. "Shutdown Contests in Multi-Plant Firms and Governmental Intervention," IZA Discussion Papers 4852, Institute for the Study of Labor (IZA).
    12. Shaun P. Hargeaves Heap & Abhijit Ramalingam & Brock V. Stoddard, 2017. "The productivity puzzle and the problem with the rich: An experiment on competition, inequality and "team spirit"," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 17-03, School of Economics, University of East Anglia, Norwich, UK..
    13. Jason G. Cummins & Ingmar Nyman, 2013. "Yes Men in Tournaments," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(4), pages 621-659, December.
    14. Legge, Stefan & Schmid, Lukas, 2013. "Rankings, Random Successes, and Individual Performance," Economics Working Paper Series 1340, University of St. Gallen, School of Economics and Political Science.
    15. Slavich, Barbara & Cappetta, Rossella & Giangreco, Antonio, 2014. "Exploring the link between human resource practices and turnover in multi-brand companies: The role of brand units’ images," European Management Journal, Elsevier, vol. 32(2), pages 177-189.
    16. Guido Friebel & Michael Raith, 2010. "Resource Allocation and Organizational Form," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 1-33, May.
    17. Petr Petera & Jana Fibírová, 2015. "Basic Approaches to Profit-Sharing and Ideas for Utilization," Český finanční a účetní časopis, University of Economics, Prague, vol. 2015(3), pages 97-117.
    18. Bhattacharya, Puja, 2016. "Inter-team contests with power differential," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PA), pages 157-175.

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