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Information Transmission through Influence Activities

Author

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  • Chongwoo Choe
  • In-Uck Park

Abstract

This paper studies the information transmission aspect of influence activities within an organization where privately informed division managers strategically communicate divisional information to headquarters to influence its capital allocation decisions. Although costly, influence activities can play a role in transmitting valuable information to headquarters. We define influence activities to be informative if they improve headquarters's inference and detrimental if they hamper it. We find that influence activities are more likely to be informative in organizations that are less averse to risk taking, that rely more on higher-power incentives, and that encourage competition in the form of contest. We also find that competition over scarce resources increases the overall level of influence activities.

Suggested Citation

  • Chongwoo Choe & In-Uck Park, 2012. "Information Transmission through Influence Activities," Monash Economics Working Papers 53-12, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2012-53
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    References listed on IDEAS

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    More about this item

    Keywords

    Influence activities; information transmission;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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