Technological interdependence, labor production functions, and control systems

Abstract

This study uses Thompson's Organizations in Action (New York: McGraw Hill, 1967) definition of internal interdependence in order to examine the potential link between technology and control. The internal interdependence of a firm implies a functional form of the group labor production function. The labor production function in turn defines the individuals that can affect group performance. This study hypothesizes that the control system should focus on these individuals. As an example of the interdependence-control link, implications for budget-based incentive contracts are analyzed.