2002/26 LEM Working Paper Series

The Uneasy Organizational Matching Between Distribution of Knowledge, Divisionof Labor and Incentive Governance
Giovanni Dosi, Daniel Levinthal and Luigi Marengo
In this paper we present a general model of organizational problem-solving in which organizations engage into an activity of cognition (un-derstanding the world in which they operate) and an activity of action (implementing those policies which cognition indicates as targets which better fit the world s characteristics). Both cognition and action are adaptively determined as the organization faces limitations in the cog-nitive capabilities of its members and in its control functions. Interde-pendencies among relevant dimensions of the environment and among basic operational tasks are only partly understood. The model allows us to study various combinations of decompositions of cognition and ac-tion and various stylized reward systems. In particular, we can address issues of centralization vs. decentralization of cognition, production and rewards schemes and the possible complementarities among these choices.

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