International Journal of Business and Economics Volume 2, No. 3 December, 2003

On Incentives for an Efficient Flow of Knowledge within Multinationals

Amir Shoham

Department of Business Administration , Ben-Gurion University, Israel and Negev Academic College of Engineering, Israel

Varda Lewinstein Yaari

Department of Business Administration, Ben-Gurion University, Israel

David M. Brock

Department of Business Administration, Ben-Gurion University, Israel

Abstract

In this paper we develop a principal-agent, game-theoretic model of an MNC, intended to add to the understanding of how smart choices between incentives, monitoring, and structures are linked to an effective intra-firm flow of knowledge. We find that the equilibrium depends on the efficiency of substituting incentives for monitoring. Our study sheds light on arguments within the international management field about monitoring, incentives for managers, and managing knowledge transfer between subsidiaries.

Keywords：multinational, incentives, monitoring.

JEL Classifications：F23, M10, M20.

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