Efficiency of Resource Allocation in Multibusiness Firms : Theory and Evidence

This chapter reviews the theoretical and empirical literature on the efficiency of resource allocation in multibusiness firms. The chapter proceeds by discussing the differences between resource allocation in markets vs. firm hierarchies in section 2. This discussion establishes the costs and benefits of internal resource allocation (i.e., allocation in multibusiness firms). Section 3 summarizes the process of resource allocation in multibusiness firms. Section 4 reviews the theoretical and empirical literature on the efficiency of resource allocation while section 5 discusses the role of managerial incentives and conduct in the process and outcomes of resource allocation in multibusiness firms. Section 6 concludes the chapter