Most observers agree that centrally planned economies fail because it is impossible for bureaucrats in large government hierarchies to coordinate different sectors of an economy as efficiently as market mechanisms do. Many diversified firms, however, are as large as some economies and use private sector hierarchies to coordinate diverse business activities in a firm. If you do not consider these large private sector hierarchies as different from the government hierarchies of centrally planned economies, then why do they continue to exist?
Answer to relevant QuestionsSuppose that the optimal transfer price between one business and all other business activities in a firm is the market price. What does this condition say about whether this firm should own this business?Consider the joint venture between General Motors and Toyota. GM has been interested in learning how to profitably manufacture high-quality small cars from its alliance with Toyota. Toyota has been interested in gaining ...If adverse selection, moral hazard, and holdup are such significant problems for firms pursuing alliance strategies, why don’t they instead adopt a “go it alone” strategy to replace strategic alliances?It has been shown that so-called “poison pills” rarely prevent a takeover from occurring. In fact, sometimes when a firm announces that it is instituting a poison pill, its stock price goes up. Why?Are international organizational options for implementing an international strategy just special cases of the M-form structure, with slightly different emphases, or are these international organizational options ...
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