Organizational structure and innovative activity

A model is analyzed in which agents exert effort to create innovations within an organization. When payments are infeasible, the decision on the implementation of a proposal is shown to bemadeby simplemonotonic decision rules. A trade-off arises between the use of information and the incentives created by a rule. If the former dominates it will currently be optimal to install a hierarchy. Otherwise decentralization by granting autonomy to innovators may be better. Requiring unanimous decision-making is optimal if a strong filtering of proposals is necessary.