WHO CONTROLS WHAT AND WHEN? HOW TIMING AND CONTROL INFLUENCE COORDINATION AND INCENTIVES IN JOINT PROJECTS

Strategy & Business Policy

Speaker: Claudio Panico

Associate Professor Bocconi, Milan

Videoconference

Abstract

In joint projects, parties execute separate but complementary tasks. Consequently, control over decisions and the timing of decisions matter greatly for incentives and outcomes. We base our analysis on two key distinctions that we incorporate in an analytical model. First, we distinguish between control over resource allocation and control over task sequencing. Second, we emphasize the timing of both resource allocation (ex ante commitment and ex post adaptation) and task execution (parallel versus sequential execution). Our first insight is that the allocation of resources differs according to the timing. With commitment, the party in control retains all of the resources and the aim is to reduce (the cost of) its dedicated effort. With adaptation, the allocation is more balanced, as the aim is to reduce differences in productivity between tasks. Our second insight is that the timing of resource allocation shapes the parties’ coordination problems when they execute their tasks independently and that these problems are more severe with commitment. We also study the effectiveness of governance when allowing for control over the sequencing of tasks, and find that commitment is more effective from an individual and an aggregate perspective.