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Divisional power, intra-firm bargaining and rent-seeking behavior in multidivisional corporations

Author

Listed:
  • Pietro Navarra

    (Università di Messina (ITA) and CPNSS, London School of Economics (USA))

  • Ram Mudambi

    (Temple University (USA) and University of Reading (UK))

Abstract

Increasing divisional operational responsibilities and the dispersal of knowledge creating activities within the firm have loosened the traditional hierarchical structure of multi-divisional firms. In this paper we argue that a similar mixture of competition and cooperation that is found in inter-firm relationships now characterizes intra-firm relationships. Our model describes a situation in which divisional managers have their own objectives that may diverge from those of the firm as a whole.Thus, divisional managers are both profit-seekers in creating value that can be appropriated and rent-seekers in attempting to maximize their divisional share of the value d by the firm. The bargaining power of a division to maintain and increase its share of the profits generated by the operations of the firm as whole is crucially determined on its strategic independence.

Suggested Citation

  • Pietro Navarra & Ram Mudambi, 2004. "Divisional power, intra-firm bargaining and rent-seeking behavior in multidivisional corporations," Economics Bulletin, AccessEcon, vol. 4(13), pages 1-10.
    • Handle: RePEc:ebl:ecbull:eb-03d20001
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    References listed on IDEAS

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    2. Galizzi, Matteo M. & Miraldo, Marisa, 2011. "The effects of hospitals' governance on optimal contracts: Bargaining vs. contracting," Journal of Health Economics, Elsevier, vol. 30(2), pages 408-424, March.
    3. Lee, Jeoung Yul & Jiménez, Alfredo & Bhandari, Krishna Raj, 2020. "Subsidiary roles and dual knowledge flows between MNE subsidiaries and headquarters: The moderating effects of organizational governance types," Journal of Business Research, Elsevier, vol. 108(C), pages 188-200.
    4. Ilya R. P. Cuypers & Gokhan Ertug & John Cantwell & Akbar Zaheer & Martin Kilduff, 2020. "Making connections: Social networks in international business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(5), pages 714-736, July.
    5. Murphree, Michael & Petersen, Bui & Warrian, Peter & Gosine, Ray, 2022. "Scope and scale of technology challenge and MNE subsidiary knowledge sourcing in host countries," Technovation, Elsevier, vol. 116(C).
    6. Jens Gammelgaard & Frank McDonald & Heinz Tüselmann & Christoph Dörrenbächer & Andreas Stephan, 2009. "Subsidiary Role and Skilled Labour Effects in Small Developed Countries," Management International Review, Springer, vol. 49(1), pages 27-42, February.
    7. Ilya R. P. Cuypers & Gokhan Ertug & John Cantwell & Akbar Zaheer & Martin Kilduff, 0. "Making connections: Social networks in international business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 0, pages 1-23.

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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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