Opportunism, incentives, and the m-form hypothesis: A laboratory study☆

https://doi.org/10.1016/0167-2681(88)90029-7Get rights and content

Abstract

Opportunism is one central premise of the M-form hypothesis. This premise is investigated in a laboratory experiment using M-form and U-form organizations under incentives based on corporate profit and divisional profits. There was greater opportunism under U-form organization than under the M-form, and under divisional profit than under corporate profit incentives. Additionally, a misguided altruism lead a number of individuals to misrepresent information. The M-form yields higher performance than the U-form. Also, corporate profit incentives yield higher total profit than divisional profit incentives. The results partially explain why empirical studies do not strongly support the M-form hypothesis.

References (26)

  • John Cable et al.

    Hierarchies and markets: An empirical test of the multidivisional hypothesis in West Germany

    International Journal of Industrial Organization

    (1983)
  • John Cable et al.

    Internal organization, business groups and corporate performance: An empirical test of the multidivisional hypothesis in Japan

    International Journal of Industrial Organization

    (1985)
  • H.O. Armour et al.

    Organization structure and economic performance: A test of the multidivisional hypothesis

    Bell Journal of Economics

    (1978)
  • William J. Baumol et al.

    Decomposition, pricing for decentralization and external economies

    Management Science

    (1964)
  • Richard M. Burton et al.

    A computer simulation test of the M-form hypothesis

    Administrative Science Quarterly

    (1980)
  • Richard M. Burton et al.

    Designing efficient organizations: Modelling and experimentation

    (1984)
  • A.D. Chandler

    Strategy and Structure

    (1962)
  • Stephen E. Fienberg

    The Analysis of Cross-Classified Categorial Data

    (1980)
  • L.Peter Jennergren

    Studies in mathematical theory of decentralized resource allocation

  • L.Peter Jennergren

    On the design of incentives in business firms — A survey of some research

    Management Science

    (1980)
  • L.Peter Jennergren et al.

    Simulation experiments of resource-allocation decisions in two-level organizations

    Social Science Research

    (1973)
  • Birger Ljung et al.

    An experimental test of the Dantzig and Wolfe decomposition algorithm as a planning tool in a business firm

    Scandinavian Journal of Economics

    (1979)
  • Andrew P. Luzi et al.

    An experimental study of performance information systems

    Management Science

    (1982)

    • Cited by (0)

    ☆

    A grant from the Danish Social Science Research Council supported the experiments.

    View full text
    Copyright © 1988 Published by Elsevier B.V.