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Computer modelling the costs of management control in the development of knowledge-based SMEs

Computer modelling the costs of management control in the development of knowledge-based SMEs Organisational development involves minimising internal transaction costs (`friction'). `Self-interest seeking with guile' introduces friction raising internal costs and management control (in the sense of the control of management) introduces checks and balances to limit extensive `guile', but control mechanisms themselves incur costs and ideally the costs for control should not exceed the costs of the friction. Costs are not well-quantified and if estimates occurring in case studies are seldom and often oblique. To obtain precise values scientific methods are needed. One computer model can predict outcomes of changes within organisations; this model shows the costs of `guile' are small in the short term: One departmental manager blocking information flow reduced the financial performance organisation-wide by 1.4% in that department plus 1.2% elsewhere in the organisation. Two such managers reduced performance by 4.1% and four such managers reduced performance by 6.4%. Guileful behaviour also added instability at size over 150 employees. Keywords: computer model; growth of SMEs; information gatekeeping; management control; transaction cost economics. Reference to this paper should be made as follows: Mellor, R.B. (2016) ` in the development of knowledge-based SMEs', Int. J. Knowledge-Based Development, Vol. 7, No. 4, pp.378­388. Biographical notes: Robert B. Mellor earned doctorates http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Knowledge-Based Development Inderscience Publishers

Computer modelling the costs of management control in the development of knowledge-based SMEs

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Publisher
Inderscience Publishers
Copyright
Copyright © 2016 Inderscience Enterprises Ltd.
ISSN
2040-4468
eISSN
2040-4476
DOI
10.1504/IJKBD.2016.080861
Publisher site
See Article on Publisher Site

Abstract

Organisational development involves minimising internal transaction costs (`friction'). `Self-interest seeking with guile' introduces friction raising internal costs and management control (in the sense of the control of management) introduces checks and balances to limit extensive `guile', but control mechanisms themselves incur costs and ideally the costs for control should not exceed the costs of the friction. Costs are not well-quantified and if estimates occurring in case studies are seldom and often oblique. To obtain precise values scientific methods are needed. One computer model can predict outcomes of changes within organisations; this model shows the costs of `guile' are small in the short term: One departmental manager blocking information flow reduced the financial performance organisation-wide by 1.4% in that department plus 1.2% elsewhere in the organisation. Two such managers reduced performance by 4.1% and four such managers reduced performance by 6.4%. Guileful behaviour also added instability at size over 150 employees. Keywords: computer model; growth of SMEs; information gatekeeping; management control; transaction cost economics. Reference to this paper should be made as follows: Mellor, R.B. (2016) ` in the development of knowledge-based SMEs', Int. J. Knowledge-Based Development, Vol. 7, No. 4, pp.378­388. Biographical notes: Robert B. Mellor earned doctorates

Journal

International Journal of Knowledge-Based DevelopmentInderscience Publishers

Published: Jan 1, 2016

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