Organizational form and strategic managerial delegation

This paper analyzes the impacts of organizational form on the strategic choices of managerial incentives. We employ the often-discussed two-stage Cournot duopoly model and consider two variants of organizational structure. Our study shows that when both firms delegate a team of two managers to make output decisions, an increase in the bargaining power of a firm's sales-oriented manager increases its competitive advantage. When firms choose different organizational forms, owner of the firm with single manager would direct the manager to pure sales-maximization. However, even so, it does not necessarily have higher profits.