IDEAS home Printed from https://ideas.repec.org/p/wdi/papers/1997-51.html
   My bibliography  Save this paper

Incentives, Scale Economies, and Organizational Form

Author

Listed:
  • Eric Maskin
  • Yingyi Quan
  • Chenggang Xu

Abstract

We model organization as the command-and-communication network of managers erected on top of technology (which is modeled as a collection of plants). In our framework, the role of a manager is to deal with shocks that affect the plants that he oversees directly or indirectly. Organizational form is then an instrument for (a) economizing on managerial costs, and (b) providing managerial incentives. We show that two particular organizational forms, the M-form (multidivisional form) and the U-form (unitary form), are the optimal structures when shocks are sufficiently "big." We argue however that, under certain empirical assumptions, the M-form is likely to be strictly preferable once incentives are taken into account. We conclude by showing that the empirical hypotheses on which this comparison rests are satisfied for Chinese data.

Suggested Citation

  • Eric Maskin & Yingyi Quan & Chenggang Xu, 1997. "Incentives, Scale Economies, and Organizational Form," William Davidson Institute Working Papers Series 51, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:1997-51
    as

    Download full text from publisher

    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39441/3/wp51.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Masahiko Aoki, 2013. "The Evolution of Organizational Conventions and Gains from Diversity," Chapters, in: Comparative Institutional Analysis, chapter 6, pages 59-71, Edward Elgar Publishing.
    2. Chen, Ye & Li, Hongbin & Zhou, Li-An, 2005. "Relative performance evaluation and the turnover of provincial leaders in China," Economics Letters, Elsevier, vol. 88(3), pages 421-425, September.
    3. Hongbin Li & Li-An Zhou, 2003. "Political Turnover and Economic Performance: The Disciplinary Role of Personnel Control in China," Discussion Papers 00002, Chinese University of Hong Kong, Department of Economics.

    More about this item

    Keywords

    organizational reform; scale economies; incentives; yardstick competition; China;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wdi:papers:1997-51. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WDI (email available below). General contact details of provider: https://edirc.repec.org/data/wdumius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.