Organizational design with a budget constraint

Gersbach, Hans; Wehrspohn, Uwe

doi:10.1007/s100580050010

Cited by 5 publications

(3 citation statements)

References 4 publications

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“…On the other hand, in contexts in which hierarchies choose to use both signals, the relative advantages of polyarchies and hierarchies depend on market conditions. 1 1 GERSBACH AND WEHRSPOHN [1998], assuming the presence of a budget constraint that forces the different organizational forms to implement the same number of projects and exogenous screening rules, obtain different results. Because when a project is rejected it is not costly to approve alternative ones, the relevance of Type I errors is reduced and hierarchy always performs better.…”

Section: Related Workmentioning

confidence: 99%

Organizational Design, Project Selection, and Incentives

Paola¹,

Scoppa²

2006

JITE

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This paper compares benefits and costs related to hierarchical and decentralized organizations in an agency framework. We show that the relative efficiency of hierarchy diminishes in contexts with asymmetric information. When effort is not observable, performance-related pay is required in order to encourage the agent to work hard. With risk-averse agents the use of this incentive system is more costly under hierarchy rather than under decentralization, in that a higher wage is necessary to elicit effort. From the efficiency comparison of hierarchy and delegation, a trade-off emerges between the advantages deriving from the principal's screening activity and the higher agency costs that this induces.

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Section: Related Workmentioning

confidence: 99%

Organizational Design, Project Selection, and Incentives

Paola¹,

Scoppa²

2006

JITE

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“…Other economic tasks have been modeled by Page (1996), Miller (1996), Watkins (1998), andDeCanio et al (2000). Issues of optimal organizational design (in models in which the optima can be determined analytically) have been examined by Grandori (1991), Kennedy (1994), Marschak and Reichelstein (1998), and Gersbach and Wehrspohn (1998).…”

Section: Introductionmentioning

confidence: 99%

The Importance of Organizational Structure for the Adoption of Innovations

2000

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Organizational structure affects both the overall behavior of firms and the situations of individuals and subunits within firms. The effect of exogenous changes in the environment (market prices, costs, or regulations) on organizations can be partitioned into the immediate direct effect of the change and the full effect after organizational structure has had time to adjust. This paper develops a computational model of the diffusion of a profitable innovation through a firm, and uses numerical simulations to calculate the relative importance of the direct and structural adjustment components of changes in profitability. One finding is that a failure to recognize the importance of organizational structure on the performance of firms will lead to serious bias in estimation of the costs or benefits of a change in external circumstances. The type of network model developed also has implications for the individuals and divisions that make up the firm. We examine some of the structural characteristics of well-adapted organizations, and show that asymmetries and economic inequalities emerge even when the individual agents' personal characteristics are identical.organizational theory, innovation, inequality, structural change, algorithmic computation

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“…On the cost side, Koh (1992) introduces variable screening costs whereas Gersbach and Wehrspohn (1998) consider the effect of a budget constraint for project development. Swank and Visser (2008) and Jost and Lammers (forthcoming) consider the effect of agency problems when agents have reputational concerns or when one of the agents has to implement the approved projects.…”

Section: Introductionmentioning

confidence: 99%

The organization of project evaluation under competition

Jost

Lammers

2009

Rev Manag Sci

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This article examines the optimal organizational form of project evaluation under competition. The evaluations are carried out by two fallible screening units that sequentially assess projects. Screening can be organized as a hierarchy or a polyarchy. We show that as competitive pressure rises, the polyarchy becomes less attractive. Therefore, different organizational forms might be found in different industries depending on the degree of competition. In addition, we examine endogenous screening rules under competition: For symmetric situations, we show that polyarchies will employ higher decision thresholds compared to hierarchies. Nonetheless, as in the case of exogenous screening rules, the hierarchy becomes more attractive the higher the degree of competition.

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Organizational design with a budget constraint

Cited by 5 publications

References 4 publications

Organizational Design, Project Selection, and Incentives

Organizational Design, Project Selection, and Incentives

The Importance of Organizational Structure for the Adoption of Innovations

The organization of project evaluation under competition

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