The Uneasy Organizational Matching Between Distribution of Knowledge, Divisionof Labor and Incentive Governance

In this paper we present a general model of organizational problem-solving in which organizations engage into an activity of cognition (understanding 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 cognitive 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 action 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.