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

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.

[1]  W. Ouchi.  The M-Form society. , 1985, Human resource management.

[2]  Charles R. Plott,et al.  Industrial Organization Theory and Experimental Economies , 1982 .

[3]  L. Vogel,et al.  Strategy and Structure , 1986 .

[4]  R. Burton,et al.  Designing efficient organizations : modelling and experimentation , 1986 .

[5]  William G. Ouchi,et al.  Markets, Bureaucracies, and Clans. , 1980 .

[6]  J. Cable,et al.  Internal organisation, business groups and corporate performance: An empirical test of the multidivisional hypothesis in Japan , 1985 .

[7]  O. Williamson,et al.  Markets and Hierarchies: Analysis and Antitrust Implications. , 1977 .

[8]  A. V. D. Ven,et al.  Sociologists, Economists, and Opportunism , 1985 .

[9]  Joseph E. McGrath,et al.  Dilemmatics: The Study of Research Choices and Dilemmas , 1981 .

[10]  D. Teece,et al.  Organizational Structure and Economic Performance: A Test of the Multidivisional Hypothesis , 1978 .

[11]  Kenneth D. Mackenzie,et al.  An Experimental Study of Performance Information Systems , 1982 .

[12]  T. Fabian,et al.  Decomposition, Pricing for Decentralization and External Economies , 1964 .

[13]  R. Burton,et al.  A Computer Simulation Test of the M-Form Hypothesis , 1980 .

[14]  W. Dugger.  The Economic Institutions of Capitalism , 1987 .

[15]  J. Cable,et al.  INTERNAL ORGANIZATION AND PROFIT: AN EMPIRICAL ANALYSIS OF LARGE U.K. COMPANIES , 1978 .

[16]  Karl E. Weick,et al.  An Assessment Of Laboratory Experiments In Accounting , 1982 .

[17]  David J. Teece,et al.  INTERNAL ORGANIZATION AND ECONOMIC PERFORMANCE: AN EMPIRICAL ANALYSIS OF THE PROFITABILITY OF PRINCIPAL FIRMS* , 1981 .

[18]  An Experimental Test of the Dantzig and Wolfe Decomposition Algorithm as a Planning Tool in a Business Firm , 1979 .

[19]  Peter Jennergren,et al.  Simulation experiments of resource-allocation decisions in two-level organizations , 1973 .

[20]  J. Cable,et al.  Hierarchies and markets: An empirical test of the multidivisional hypothesis in West Germany , 1983 .

[21]  L. Jennergren.  On the Design of Incentives in Business Firms—A Survey of Some Research , 1980 .

[22]  L. A. Marascuilo,et al.  Nonparametric and Distribution-Free Methods for the Social Sciences , 1977 .

[23]  O. Williamson.  The Modern Corporation: Origins, Evolution, Attributes , 1981 .