SFB 303 Discussion Paper No. A - 601

Author: Sliwka, Dirk
Title: On Organizational Decision Rules and Innovative Activity
Abstract: We analyze a model in which agents exert effort to create innovations within an organization. When payments are infeasible, the decision on the implementation of a proposal is shown to be made by simple monotonic decision rules. Then we look for optimal rules in several contexts. A trade-off arises between the use of information and the incentives created by a rule. If the former dominates it will currently be optimal to install a hierarchy. Otherwise granting autonomy to the innovators may be better. The unanimity rule may be optimal if average proposals are bad for the organization and a strong filtering is necessary.
Keywords: Delegation, Decentralization, Incentives, Initiative, Decision Rules, Authority
JEL-Classification-Number: D23, L20
Creation-Date: July 1999
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