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Designing division of labor with strategic uncertainty within organizations: Model analysis and a behavioral experiment
Author(s) -
Kamijo Yoshio,
Nakama Daisuke
Publication year - 2022
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12506
Subject(s) - division of labour , division (mathematics) , game theory , strategic choice , microeconomics , organizational architecture , computer science , rational analysis , economics , management science , operations research , industrial organization , knowledge management , psychology , engineering , mathematics , arithmetic , market economy , cognition , neuroscience
For managers who are responsible for designing the division of labor, there are prototypes such as the divisional and functional designs, but insufficient knowledge of what to consider when selecting them. To address this shortfall, we developed a multiple economic game model with a two‐step structure to examine the strategic interdependence between the two prototypes. We analyzed the model from three different perspectives: a traditional analysis, an equilibrium analysis, and a behavioral analysis followed by a laboratory experiment. While the first analysis revealed that the functional design would outperform divisional design when individual decisions are exogenous, the game theoretic equilibrium analysis demonstrated that the two prototype designs have similar equilibria when individuals are rational. However, assuming that individuals made autonomous decisions with accessible information under given organizational structures, behavioral analysis derived predictions that the divisional design was more likely to produce favorable consequences than the functional design. This prediction was confirmed by the economic experiment in the laboratory. These results imply that the strategic uncertainty within organizations differs according to the designs and affects organizational consequences.