This paper explores the foundations for developing incentives for influencing units operating within centrally managed organizations. We begin by laying out the theory of managerial control in principal-agent contexts and draw from the incentive mechanisms developed in the related field of economic regulation. In particular, we highlight issues, differences and similarities in three recently proposed approaches under these circumstances, not only to compare them, but more importantly to motivate and arrive at requirements that should be met by incentivization systems in centrally managed multi-unit organizations. The stipulated requirements are not intended to be exhaustive but rather aim at defining conceptual foundations for further discussions and encouraging avenues for future research in this field. Our investigations are supported by graphical examples and an analysis of empirical data from banking.
Bibliographical noteCopyright © Operational Research Society 2023. This is an Accepted Manuscript of an article published by Taylor & Francis in Journal of the Operational Research Society on 28th April 2023, available at: https://doi.org/10.1080/01605682.2023.2197931
This work was supported by the Deutsche Forschungs-gemeinschaft (DFG) in the context of the research fund AH 90/5-3.
- data envelopment analysis
- central management
- incentive regulation
- incentivization mechanism