Large companies are usually organized into business units, yet some activities are almost always centralized in a company-wide functional
unit. We first show that organizations endogenously create an incentive conflict between functional managers (who desire excessive standardization) and business-unit managers (who desire excessive local adaptation). We then study how the allocation of authority
and tasks to functional and business-unit managers interacts with
this endogenous incentive conflict. Our analysis generates testable implications for the likely success of mergers and for the organizational structure and incentives inside multidivisional firms. (JEL D23, D86, G34, L22)
Dessein, Wouter, Luis Garicano, and Robert Gertner.
"Organizing for Synergies."
American Economic Journal: Microeconomics,
Organizational Behavior; Transaction Costs; Property Rights
Economics of Contract: Theory
Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
Firm Organization and Market Structure