Hi Reda,

in business (in situation that you mentioned) you can use experience for everyday life: if you have anything to offer to your friend, to your partner, to your member of family, it will be easy to get their help or their advice. So, heads of departments must have knowledge, experience or anythig else to offer to their headquarter members and they will be in better positions. If not, managers will be in worse situation and environment in comparatrion with managers who have something "special" - knowledge from some specific area, experience, even political or business conections...

Now, I must leave my office, but if you want we can discuss this very interesting topic next week.

Have a nice weekend.

Igor  

Hello Rida;

When there is  asymmetric information, player 1( here division manager) has information  that he only obseves it. Player 2 (here Top management) have not this information. 

Player 1 and 2 make decisions, You may probably design your game tree, taking into account this point, and  introduce other participants or players if needed in your game (if you are looking to game modelling).

Therefore, if you may use Nash equilibrium, order not matter (who is player 1 or player 2). But if you are looking for a sequential game, you may order the actions of players and who play first (may be here you will use the Stackelberg equilibrium). You can also use experiment (experimental gae theory) to answer to the research question. 

Hope that I have succeeded answer to your question.  

All the best

Thank you Mr Igor Jurčić. As you like, we can discuss this subject at any time you like

Best regards

Very interesting answer Mrs Souhir Neifar thank you very much

Can you suggest me articles to read about this subject. I hope understand how a division's manager, by using this "game theory", achieved his objectif and obtain his expected allocation he want, obviously in the context where information is asymmetric.

Best regards

It seems that the problem is: how to convince top management to allocate resources when supporting data is not accurate? I think there is only one option: the manager(s) must present a specific business plan, based on data they have to convince is accurate, probably from a specific source. Profitability or efficiency of the proposal must be evident. If necessary they can: i) use the services of a consultant,; ii) use a rhetorical strategy; iii) mobilize allies. But most of all, the managers must be sure about the 'good business' they have in hand. If you feel the need of more discussion on this basis, please be welcome. Best 

Hi Reda,

This is a very interesting question. Before being full time academic, I worked as management control manager in medium sized manufacturing companies, for around 25 years. I know what you mean.

When information is asymmetric, it means that the management control system is not accurate. Data probably is not aligned either in a bottom-up sequence, or in a horizontal relation of responsibility and behavior between managers. In the specific situation you mention, is there a fruitful dialogue between the divisional managers? Were the objectives clearly settled? Everybody knows who is responsible for? And were the resources clearly allocated to managers in a relation of cause-and-effet with the objectives? 

If the situation fits on a non-accurate management control system, then the problem is structural. The system must change. But change must be mainly a cultural change. And that takes time. Lots of time. But this is not your question.

Hello Mr Luís PIMENTEL,

Thank you very much for your interesting answer.

Concerning this topic, I am studying the situation of firm multidivisional in which a supposed internal capital market plays an important role within the firm.

And on the basis of this assumption, I'm just trying to understand how division managers will do so that they can have the maximum possible in terms of resource allocations, knowing that the allocation of resources on the internal capital market is based on the performance of the divisions and also the characteristics of the markets in which these divisions operate.

I should be grateful if you could advise me some articles to read in order to understand the interactions within multidivisional structures in the presence of an internal capital market.

Best regards

Réda ZUKRI

Hi Reda,

In my view your topic encompasses two different perspectives: i) managerial; ii) sociological. There are not many scientific articles on managerial perspectives. On the other hand, there are lots of good books. I recommend 'Management Control Systems', Keneth Merchand and Win van der Stede (2012).

But I think  the sociological perspective fits better into your question (institutional theory and resources dependence theory). In my view, it would be interesting to analyze recent directions in institutional theory, particularly the following branches/concepts: institutional entrepreneurship, institutional logics, practice variation, internal dynamics of organizations (there are many papers that you'll find in database research). I do not know articles comprising directly your topic. But I do know a similar interesting study carried out in Portugal and published in top journals: i) Cruz, I., M. Major and R.W. Scapens (2009), Institutionalization and practice variation in the management control of a global/local setting, Accounting, Auditing and Accountability Journal 22, 91-117; ii) Cruz, I., R.W. Scapens and M. Major (2011), The localization of a global management control system, Accounting, Organizations and Society 36(7), 412-427.

Not crucial, but I also recommend the reading of seminal papers on institutional theory: i) DiMaggio, P.J. and W.W. Powell (1983), The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields, American Sociological Review 48(2), 147-160; ii) Meyer, J.W. and B. Rowan (1977), Institutionalized organizations: Formal structure as myth and ceremony, American Journal of Sociology 83, 340-363; iii) Zucker, L.G. (1977), The role of institutionalization in cultural persistence, American Sociological Review 42, 726-743; iv) Zucker, L.G. (1991), Postcript: microfoundations of institutional thought, in. Powell, W.W. and P.J. DiMaggio (Eds.), The New Institutionalism in Organizational Analysis, Chicago, IL: The University of Chicago Press, 103-107.

Regarding resources dependence theory, you should read as a start: i) Pfeffer, J. and G.R. Salancyk (1978), The external control of organizations: A resource dependence perspective. New York: Harper and Row; ii) Oliver, C. (1991), Strategic responses to institutional processes, Academy of Management Review, 16, 145-179.

Hope you find these suggestions useful. Best regards,

Luís Pimentel