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Organizational Theory and Decision Making

  • Teacher(s):   C.Zehnder  
  • Course given in: English
  • ECTS Credits: 6 credits
  • Schedule: Autumn Semester 2020-2021, 4.0h. course (weekly average)
  •  sessions
  • site web du cours course website
  • Related programmes:
    Master of Science (MSc) in Economics

    Maîtrise universitaire ès Sciences en management, Orientation Behaviour, Economics and Evolution

    Master of Science (MSc) in Management, Orientation Strategy, Organization and Leadership

    Master of Science (MSc) in Management, Orientation Marketing

    Master of Science (MSc) in Management, Orientation Business Analytics
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Objectives

A large part of economic activity takes place within firms. In modern economies the total value of within-firm transactions is approximately equal to that of market transaction and the worldwide value of mergers and acquisitions is in the trillions. Understanding why firms exist, why they grow or shrink over time, and how they operate is essential. The course builds on prominent approaches in organizational economics and combines theoretical concepts with empirical data (experiments, field data) and managerial decision-making (case studies). The central topics are governance choices (vertical integration and outsourcing) and the internal organization of firms (incentives, hierarchies, and leadership).

Contents

The course has two parts. In the first half of the course we focus on governance choices. In this part we are interested in understanding why firms sometimes decide to vertically integrate (e.g. Netflix’s decision to produce their own original content) and sometimes decide to outsource parts of their business (e.g. Acer’s decision not to manufacture many of their products inhouse anymore). This discussion will lead us to some of the leading theories of the firm such as transaction cost economics and the property rights approach. Using a series of real-life case studies, we will examine how these theories can inform practical management decisions in the context of mergers and acquisitions and outsourcing. You will work on the case studies in groups. Your task will be to put yourself in the shoes of a consulting team that needs to prepare a presentation for the top management of a company.

The second half of the course concentrates on the internal organization of firms. A central problem in firms is that the natural incentives existing in pure market transactions are no longer present. We therefore discuss how managers can motivate their employees to operate in the interest of their firm. The principal-agent model delivers important insights on this issue. It illustrates how managers should structure compensation plans, which information they should use and how closely they should monitor their employees depending on the firm's technology, the characteristics of the work environment and the employee's preferences. Building on these basic principles for the provision of explicit incentives, we will extend the agency model and apply it to more complex and realistic environments where multi-tasking, teamwork and intertemporal spillovers make the motivation of workers difficult. We will see that in those contexts extrinsic motivation through rewards and sanctions alone will often not suffice to achieve the desired results. This leads us to a discussion of the role of social motives, norms and leadership. The case studies for the second part will be related to employee motivation problems in various industries and contexts. We will again rely on group work and simulate the task of a consulting team in charge of advising the managers of a company.

Evaluation

First attempt

Exam:
Written 2h00 hours
Documentation:
Allowed
Calculator:
Allowed
Evaluation:

Online exam, 2 hours (75%) + group work (25%)

Retake

Exam:
Written 2h00 hours
Documentation:
Allowed
Calculator:
Allowed
Evaluation:

Exam, 2 hours (100%)



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