Organizational Structure and Product Market Competition

37 Pages Posted: 5 Jul 2012

See all articles by Jung Hur

Jung Hur

affiliation not provided to SSRN

Yohanes E. Riyanto

Nanyang Technological University (NTU) - Division of Economics

Date Written: Fall 2012

Abstract

This paper explores the link between delegation of authority and product market competition. It considers a firm that is contemplating entering a market served by an incumbent. The firm can adopt either a decentralized or a centralized authority structure. In the former, authority is delegated to an agent, while in the latter, it is retained by the principal. We address the questions of how the toughness of future product market competition affects the delegation decision, and how this decision in turn affects product market competition. The delegation decision is determined by a trade‐off between inducing the agent to take greater initiative and accepting lower operating profits from a less efficient decision taken by the agent.

Suggested Citation

Hur, Jung and Riyanto, Yohanes E., Organizational Structure and Product Market Competition (Fall 2012). Journal of Economics & Management Strategy, Vol. 21, Issue 3, pp. 707-743, 2012. Available at SSRN: https://ssrn.com/abstract=2100704 or http://dx.doi.org/10.1111/j.1530-9134.2012.00340.x

Jung Hur

affiliation not provided to SSRN

Yohanes E. Riyanto

Nanyang Technological University (NTU) - Division of Economics ( email )

HSS 04-53, 14 Nanyang Drive
Singapore, 639798
Singapore

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