We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Effort Observability, Incentive Systems, and Organizational Forms.
- Authors
De Paola, Maria; Scoppa, Vincenzo
- Abstract
This paper analyses the choice between a centralized and a decentralized organizational structure focusing on the relationship existing between the allocation of decision rights, the degree of observability of effort and the use of different compensation systems. Profitable production is realized thanks to good information being available during the project selection stage and hard work being performed in the implementation stage. Selection of projects may be made by the principal (hierarchy) or by the agent (delegation). Under the hierarchical system, the principal's participation in the design of projects allows her to gather useful information for the design of a more accurate compensation system. Therefore, we analyse the trade-off between optimal use of available information and accuracy of incentive systems, which emerges in the choice of organizational form.
- Subjects
ORGANIZATIONAL structure; DECENTRALIZATION in government; WAGES; PENSIONS; HIERARCHY of needs theory (Psychology); LABOR incentives; CONJOINT analysis; OPTIMALITY theory (Linguistics); IN-house services (Business)
- Publication
LABOUR: Review of Labour Economics & Industrial Relations, 2010, Vol 24, Issue 3, p221
- ISSN
1121-7081
- Publication type
Article
- DOI
10.1111/j.1467-9914.2010.00490.x