CORPORATE STRUCTURE, R-AND-D AND INCENTIV ES

The deregulation of the telecommunications industry and its convergenc e with the broadcasting and computer industries have led to a variety of alliances within the redefined sector: The paper uses recent develo pments in the economics of a corporate structure to provide some tools for an analysis of these moves. It focuses on the firm's choice of in ternal organization, boundaries and alliances. After a brief recap of mergers and alliances in the three industries, the paper reviews the t hree possible motivations for such moves : efficiency, acquisition of market power, and objectives of entrenched managers. It then uses a fo rmal model to provide a definition for the usually loose concept of co re competency and to determine a firm's legal boundaries and sphere of influence as a function of its headquarters' ability to oversee activ ities. Last, it derives some implications of the analysis for the orga nization of R&D.