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

Authors: Robert B. Mellor

Addresses: School of Computer Science & Mathematics, Kingston University, Penrhyn Road, London, KT1 2EE, UK

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: modelling; SME growth; small and medium-sized enterprises; information gatekeeping; management control; transaction cost economics; TCE; knowledge-based SMEs; internal costs; information flow; financial performance; guileful behaviour; instability; self-interest.

DOI: 10.1504/IJKBD.2016.080861

International Journal of Knowledge-Based Development, 2016 Vol.7 No.4, pp.378 - 388

Received: 19 May 2016
Accepted: 17 Jun 2016

Published online: 05 Dec 2016 *

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