Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22852
Authors: 
Gautier, Axel
Heider, Florian
Year of Publication: 
2002
Series/Report no.: 
Bonn econ discussion papers 2002,31
Abstract: 
The Benefit and Cost of Winner Picking: Redistribution Vs IncentivesBA multi-divisional firm can engage in "winner-picking" to redistribute scarce funds efficiently across divisions. But there is a conflict between rewarding winners (investing) and producing resources internally to reward winners (incentives). Managers in winning divisions are tempted to free-ride on resources produced by managers in loosing divisions whose incentives to produce resources, anticipating their loss, are also weakened. Corporate headquarter's investment and incentive policy are therefore inextricably linked and have to be treated as jointly endogenous. The analysis links corporate strategy, compensation and the value of diversification to the characteristics of multi-divisional firms.
Subjects: 
Conglomerate
Internal capital market
JEL: 
G34
G31
L23
Document Type: 
Working Paper

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