Journal Article

Incentives, Information, and Organizational Form

Eric Maskin, Yingyi Qian and Chenggang Xu

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 67, issue 2, pages 359-378
Published in print April 2000 | ISSN: 0034-6527
Published online April 2000 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00135
Incentives, Information, and Organizational Form

Show Summary Details

Preview

We model an organization as a hierarchy of managers erected on top of a technology (here consisting of a collection of plants). In our framework, the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him. We argue that different organizational forms give rise to different information about managers' performance and therefore differ according to how effective incentives can be in encouraging a good performance. In particular, we show that, under certain assumptions, the M-form (multi-divisional form) is likely to provide better incentives than the U-form (unitary form) because it promotes yardstick competition (i.e. relative performance evaluation) more effectively. We conclude by presenting evidence that the assumptions on which this comparison rests are satisfied for Chinese data.

Journal Article.  0 words. 

Subjects: Economics

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.