Organizational Architecture and Corporate Finance
Posted: 14 May 2001
I discuss the relation between corporate finance and organizational architecture. In a recent book, Managerial Economics and Organizational Architecture (2001), my co-authors Jim Brickley and Jerry Zimmerman and I provide a systematic framework for analyzing organizational problems and structuring more effective organizations. We apply the term organizational architecture to three key aspects of the firm: (1) assignment of decision rights, (2) structure of systems to evaluate individuals and business units, and (3) the methods of rewarding individuals. In this article I illustrate how corporate financing activities should be coherent with the broader organizational architecture of the firm.
I highlight several pedagogical insights using leasing as an example.
JEL Classification: G30, G32
Suggested Citation: Suggested Citation