Allocation Of Decision Rights Research Articles

Modeling and Analyzing Operational Decision-Making Synchronization of C2 Organization in Complex Environment

In order to improve capability of operational decision-making synchronization (ODMS) in command and control (C2) organization, the paper puts forward that ODMS is the negotiation process of situation cognition with three phases about “situation cognition, situation interaction and decision-making synchronization” in complex environment, and then the model and strategies of ODMS are given in quantity. Firstly, measure indexes of three steps above are given in the paper based on the time consumed in negotiation, and three patterns are proposed for negotiating timely in high quality during situation interaction. Secondly, the ODMS model with two stages in continuous changing situation is put forward in the paper, and ODMS strategies are analyzed within environment influence and time restriction. Thirdly, simulation cases are given to validate the process of ODMS under different continuous changing situations the results of this model are better than the other previous models to fulfill the actual restrictions, and the process of ODMS can be adjusted more reasonable for improving the capability of ODMS. Then we discuss the case and summarize the influence factors of ODMS in the C2 organization as organization structure, shared information resources, negotiation patterns, and allocation of decision rights.

Quality management and contractual incompleteness: grape procurement for high-end wines in Argentina

Sourcing grapes from independent growers for use in top quality wines sold on the international market is a major organisational challenge for corporate wineries. Our paper adds to the small collection of existing literature addressing these coordination issues in the New World wine sector, by going deeper into the specifics of the contracts. Based on a case-study carried out in the Argentine province of Mendoza, this article presents an in-depth analysis of the technical process, in order to identify the contractual hazards posed by asset specificity, measurement costs, and non-contractible actions. Expanding Transaction Cost Economics to include contract completion and plural governance literature, this paper analyses the contractual and non-contractual mechanisms (price incentives, grower monitoring, allocation of decision rights to the winery, role of backward integration) used to govern such grape transactions. Through our analysis, we were able to arrive at four main conclusions. Firstly, most agreements are still verbal, with the exception of occasional written contracts, whose scope only encompasses minor legal points. It became clear to us that formal, rigid agreements are not always adequate in managing the inherently complex interactions between grape varieties, soil, farming practices and winemaking processes in high-end wine production. Secondly, extensive decision rights are allocated to wineries, to deal with incompleteness. These are key decisions to be taken during the cropping and harvesting process. Thirdly, pricing is generally kept flexible, with grape prices negotiated ex-post. This means that trade imbalances tend to be resolved in the long term. Winegrowers also benefit from financial rewards to compensate for the allocation of authority. Finally, any potential opportunistic behaviour by wineries with regard to asset specificity (in particular yield limitation) and allocation of rights is kept at bay by mechanisms such as winery reputations and credit third-party guarantee. This type of opportunistic behaviour by growers is similarly deterred through monitoring and vineyard ownership on the part of the wineries.

Accommodating Two Worlds in One Organisation: Changing Board Models in Agricultural Cooperatives

While most economic organisation literature on cooperatives has focused on changes in income rights, we study changes in the allocation of decision rights between board of directors (representing members) and managers. The traditional role of the board is to direct the activities of the managers. However, professional management increasingly makes most strategic decisions, pushing the board into a supervisory role. We present two groups of findings on changing board–management relationships. We identify three corporate governance models: traditional, management and corporation. And we present an empirical illustration showing a relationship between the choice of board model, and product portfolio and performance. Copyright © 2012 John Wiley & Sons, Ltd.

How to Get What You Want When You Do Not Know What You Want: A Model of Incentives, Organizational Structure, and Learning

In this paper we present a model of the interplay among learning, managerial intervention, and the allocation of decision rights in the context of a generalized agency problem. Within this context, actors face not only conflicting interests but also diverging cognitive “visions” of the right course of action. We assume that a principal may obtain the implementation of desired organizational policies by means of appropriate design of the allocation of decisions or by means of costly intervention through authority or incentives, and we analyze their consequences for organizational control and learning. We show that the structure of allocation of decision rights is very powerful in terms of control, but when the principal is uncertain about the course of action, organizational structure and managerial intervention complement each other in nontrivial ways and must be carefully tuned. We also show that there is a general advantage in maximizing the partitioning decision rights, because it allows both higher control and higher levels of learning.

Contractibility, Strategy, and Network Dynamics: From Franchising to Licensing

The article examines the network dynamics from franchising to licensing due to the increase of contractibility of the franchiser's system-specific assets as determinant of the allocation of decision rights between the network partners. Based on the property rights approach, residual decision rights must be allocated according to the distribution of intangible knowledge assets between the franchiser and franchisee. Our analysis derives the following hypothesis: The more contractible the franchiser's system-specific assets, the higher is the tendency from franchising toward licensing. In addition, we investigate the impact of strategy change on the standardization (contractibility) of system-specific assets and the network governance. We argue that a change of strategy may increase the contractibility of system-specific know-how and consequently the tendency toward licensing. This study presents empirical evidence from company Getifix on the network dynamics from franchising to licensing.

Internal capital markets and investment decisions

PurposeThis research attempts to explain the decentralization of investment decision. To do so, it highlights the role of the internal capital market in the allocation of decision rights and control as a factor explaining the effectiveness of investment management. The authors aim to apply the theory of the organizational architecture to the investment decision to understand its complexity and its efficiency.Design/methodology/approachAn empirical test was realized on a sample of 63 Tunisian firms using the methods of canonical correlation and cross tabulations.FindingsEven if organizational complexity has a linear and negative impact (opposite sign to what is expected) on the investment decision decentralization, which creates value, it appears that there is a positive association with the uncertainty of the environment, and a negative one with the scarcity and sharing of financial resources between units on the internal capital market.Originality/valueThe authors show that the role played by the internal capital market in the value creating requires the setting of a centralized organizational structure.

Allocation of Decision Rights and the Investment Strategy of Mutual Funds

The literature suggests that while decentralized decision-making can allow for greater specialization in an organization, it heightens the cost of coordinating decisions. The mutual fund industry – in particular, sole- and team-managed balanced funds – provides an ideal setting to test the specialization vs. coordination trade-off, since information on decision structures and fund actions is easily obtained. We document that sole-managed balanced funds, with centralized decision rights, exhibit significant market timing that requires reallocation across asset classes. However, consistent with coordination difficulties between managers specializing in particular asset classes, there is no market-timing evident in team-managed balanced funds. Team-managed funds exhibit greater returns from specialization, in the form of better security-selection performance than sole-managed funds. These results hold cross-sectionally and for funds that switch management structures. The overall returns across different management structures are similar, indicating a market equilibrium. Investor flows reward market-timing performance for sole- but not team-managed funds.

Decentralized Task Assignment and Centralized Contracting: On the Optimal Allocation of Authority

To provide efficient incentives, the three components of an incentive system (i.e., performance measurement, rewards, and the allocation of decision rights) need to be balanced against each other. In practice, the authority to decide on these components is frequently distributed across hierarchical levels, thus requiring adjusting centralized decisions with regard to decentralized authority. This paper investigates the centralized design of incentive contracts when decision authority, with respect to the allocation of tasks, is delegated to lower hierarchical levels. It provides an analysis of the optimal allocation of authority (i.e., who should be the boss) and considers the interdependencies between organizational design choices and the design of optimal incentives.

Organizational Design and Environmental Volatility

I investigate the link between a firm's operating environment and its preferred organizational structure, as determined by the allocation of decision rights, the compensation structure of its managers, and the underlying configuration of its productive assets. The results are broadly consistent with the received wisdom regarding this fit. Firms operating in volatile environments are characterized by loosely integrated operations, decentralized decision making, and a pay structure that reflects primarily division-level performance, whereas firms operating in stable environments are characterized by tightly integrated operations, typically centralized decision making, and a pay structure that is closely tied to firm-level performance. The results also provide some new insights and predictions. In particular, the results show how decreases in the cost of information increase the preference for decentralization and less integrated operations and highlight the importance of accounting for the interdependencies among the design parameters themselves in maximizing organizational performance.

Management Control and the Decentralization of R&D

The authors investigate organizational conditions influencing the allocation of decision rights made by headquarters of multinational corporations (MNCs) to their foreign R&D subsidiaries. The authors draw on the logic of management control theory to build their conceptual model and then develop this model using arguments from the R&D and time use literatures in order to test the direct and indirect effects of advanced R&D processes within the subsidiary. They find that control theory makes correct predictions in terms of three organizational conditions, namely, research nature, information asymmetry, and interdependencies, but not in terms of social controls. In addition, the authors uncover a significant interaction between research nature and advanced R&D processes that indicates a breakdown in control logic in situations of high time pressure and intense R&D effort. Their study extends the body of literature on organizational conditions that influence how R&D decision rights are allocated in the MNC by drawing attention to the task environment in the locations where R&D is performed.

Risk-Mitigation in Supply Chain Digitization: A Study of System Modularity and IT Governance

Firms face significant risk when they adopt digital supply chain systems to transact and coordinate with their partners. Drawn upon modular systems theory, this study proposes that system modularity mitigates the risk of adopting digital supply chain systems and therefore motivates firms to digitize more of their supply chain operations. The study also theorizes how the risk-mitigating effect of system modularity can be enhanced by the allocation of decision rights to the IT unit. The main logic is that IT managers with more domain IT knowledge can better utilize their knowledge in decision making to achieve effective system modularity. We tested these theoretical propositions using a survey study of Chinese companies and found empirical support. We also found that the allocation of decision rights to the IT unit does not directly mitigate the perceived risk of digital supply chain system, which highlights the role of decision allocation to the IT unit as a key moderator in risk mitigation. The study generates theoretical and practical implications on how IT governance and system modularity may jointly mitigate risk and foster supply chain digitization.

The Structure of Decision Rights in Franchising Networks: A Property Rights Perspective

This paper explains the structure of decision rights in franchising networks using property rights theory. Property rights theory explains the allocation of decision rights based on the importance of intangible assets. We submit that franchisees’ fraction of decision rights varies positively with the contractibility of local market assets and negatively with contractibility of system–specific assets. Further, franchisees’ less contractible innovation assets impact decision rights allocations more than contractible operation assets. Hypotheses tested on data from German franchisors are largely supportive. We extend the franchise literature by arguing that the contractibility of local market assets impacts the allocation of decision rights, and that decision rights allocations change for decisions involving different areas of the value chain.

How does the management of research impact the disclosure of knowledge? Evidence from scientific publications and patenting behavior

This paper examines the effect of control rights over whether to publish or patent research results. University researchers have substantial discretion over disclosure, while management in non-academic organizations often direct researchers to patent their findings. Thus, the effect of control rights can be identified by using the shift from basic to commercializable knowledge because management has a larger incentive to protect the commercializable knowledge. The effect, however, may be confounded by the heterogeneity of research paths and the organizational factors other than the allocation of decision rights. To overcome these issues, this paper exploits multiple discoveries associated with a single human gene as a research path and a discovery of a gene's linkage to a disease that may spark commercially oriented research on that gene. To isolate the effect of decision rights, multiple types of non-academic organizations are also used. Building on this variation of knowledge along research paths, the differences-in-differences estimate shows that non-academic research organizations become less likely to publish and more likely to patent than universities in the advance of commercializable knowledge.

Advising and Monitoring CEOs: The Dual Role of Boards

The board of directors performs the dual role of monitoring and advising the firm’s management. At times it makes certain key decisions itself. We study the optimal board composition (of monitoring and advisory “types”) within a cheap-talk framework where the CEO and the board each may have private information about an impending investment decision, and their incentives are imperfectly aligned. When shareholders choose both the board composition and the allocation of decision rights between CEO and board, a non-monotonic relationship between CEO bias and board composition emerges. A key concern to practitioners and regulators is “CEO power”. Counter to conventional wisdom, we show that powerful CEOs who nominate board members themselves may in fact prefer a greater degree of monitoring intensity on the board than do shareholders. As a result, regulatory interventions (such as the Sarbanes-Oxley Act) that attempt to strengthen the monitoring role of boards, may in fact be harmful in precisely those cases where agency problems are the most severe. Lastly, CEOs may be able to entrench themselves by choosing “complex” projects involving greater information advantage. In response, shareholders may commit to an advisor-heavy board to preempt entrenchment.

Effort Observability, Incentive Systems, and Organizational Forms

AbstractThis 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.

Independence of a Regulatory Institution - A Means to Alleviate Credibility Problems in the CEE Countries

In Hungary and the Central-European region, state regulation has been at the forefront of interest since the beginning of the economic transition. Among the many interesting questions raised, we would like to analyze the problem of building an appropriate allowing the industry to operate efficiently from a social point of view. We use the term regulatory system for the description of decision rights. A particular amounts to the allocation of decision rights between the different actors in a game (regulatory agency, government, courts, consumer organizations, competition office). We do not propose a specific incentive scheme, which must be enforced (and is enforceable), instead we concentrate on the possible enforcement mechanisms.

Data quality is everyone's business — Managing information quality — Part 2

In the first of these two papers, we discussed how to design data quality into your data warehouse (DWH) as you are building it. This second paper deals with maintaining a high level of quality after the DWH has gone live. Once a business intelligence solution has been put in place, ongoing data quality needs to be ensured. Data quality maintenance is supported by an appropriate governance structure: the allocation of decision rights and procedures. For errors that have arisen in batches, a data quality project is appropriate. For process causes of data non-quality, a data quality program is more appropriate. Since both kinds of errors often occur side by side, and also to ensure both short-term improvement and sustainable success, in practice a combination of these two approaches is often called for. As organizations progress through subsequent stages on their data quality journey, different measures and actions are required. To make ongoing data quality certain, you progress through information about sources of non-quality and associated organizational costs, training and awareness throughout the organization in conjunction with supporting tools and technology, and alignment and accountabilities that make producing quality the default.

Allocation of Decision Rights and Inventory Ownership in Retail Supply Chains

Motivated by the contrasting strategic choices made by two divisions of 7-Eleven regarding the risk ownership of excess inventory, our research aims to understand the drivers of the choice between consignment and retail ownership of inventory and to develop rules of thumb for determining what the right mode of operation is for different operating environments. To this end, we build a two-stage supply chain model with one retailer and one supplier, where the two parties differ in their forecasting capabilities. We investigate how power structure, differences in forecasting capabilities, product and store characteristics affect the choice of the mode of operation. Our results have several implications regarding inventory ownership in supply chains.

Locating decision rights: Evidence from the mutual fund industry

Mutual fund advisors make portfolio decisions for their funds on a daily basis. We examine the location of these portfolio decision rights on two dimensions. First, we consider the geographic location of the decision rights. Second, we consider whether the decision rights remain with an advisor or are allocated to an independent sub-advisor. We argue that the allocation of portfolio decision rights involves a tradeoff between the opportunity cost of not matching decision rights with specific knowledge, and the agency costs associated with moving the decision rights to the specific knowledge. The patterns in the location of decision rights are consistent with the tradeoff being a meaningful determinant of the allocation of decision rights in the mutual fund industry. We also find that funds that are predicted to be sub-advised and are sub-advised outperform those that are predicted to be sub-advised but are not.

The impact of corporate and national cultures on decentralization in multinational corporations

We develop and test a model of multinational corporation (MNC) decentralization in which the allocation of decision rights to subsidiaries is explained by aspects of both internal corporate culture as well as external national cultures. We extend the literature on MNC decentralization by testing the impact of both of these factors as determinants within the same model. Drawing on management control theory as a conceptual platform, we argue that the assignment of decision rights to a subsidiary in the MNC is impacted by corporate innovativeness and shared values, as well by aspects of home and host country cultures. We test our model on a sample of 119 MNC subsidiary managers drawn from a diverse range of industries and locations. The findings provide support to the proposition that corporate innovativeness positively impacts the decision to decentralize, whilst also indicating that home country individualism and host country uncertainty avoidance have a significant influence. The findings challenge established international management logic with respect to shared values—this variable is found to have a negative relationship with decentralization. Overall cultural distance is not found to be significant.