Abstract

http://ssrn.com/abstract=984561
 
 

Citations (21)



 


 



Organizing for Synergies


Wouter Dessein


University of Chicago - Booth School of Business

Luis Garicano


University of Chicago - Booth School of Business - Economics; Centre for Economic Policy Research (CEPR)

Robert H. Gertner


University of Chicago - Finance; National Bureau of Economic Research (NBER)

January 2007

CEPR Discussion Paper No. 6019

Abstract:     
Multi-product firms create value by integrating functional activities such as manufacturing across business units. This integration often requires making functional managers responsible for implementing standardization, thereby limiting business-unit managers' authority. Realizing synergies then involves a tradeoff between motivation and coordination. Motivating managers requires narrowly-focused incentives around their area of responsibility. Functional managers become biased toward excessive standardization and business-unit managers may misrepresent local market information to limit standardization. As a result, integration may be value-destroying when motivation is sufficiently important. Providing functional managers only with "dotted-line control" (where business-unit managers can block standardization) has limited ability to improve the tradeoff.

Number of Pages in PDF File: 56

Keywords: communication, coordination, incentives, incomplete contracts, merger implementation, organizational design, scope of the firm, task allocation

JEL Classification: D2, D8, L2

working papers series


Date posted: May 8, 2007  

Suggested Citation

Dessein, Wouter and Garicano, Luis and Gertner, Robert H., Organizing for Synergies (January 2007). CEPR Discussion Paper No. 6019. Available at SSRN: http://ssrn.com/abstract=984561

Contact Information

Wouter Dessein (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
Luis Garicano
University of Chicago - Booth School of Business - Economics ( email )
Graduate School of Business
1101 East 58th Street
Chicago, IL 60637
United States
773-834-2862 (Phone)
773-702-0458 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Robert H. Gertner
University of Chicago - Finance ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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