Divestment and the Control of Divisionalised Firms

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Abstract
Increasing attention has recently been devoted in the accounting literature to the control of divisionalised firms. The general thrust of this literature is to take a uni-directional view of the development of organisations, so that adequate control requires finding an optimal divisionalisation of existing activities. This paper shows that this approach misses an important managerial decision variable. Hence, rather than striving to develop increasingly complex systems, a solution to the control problem may be aided by the divestment of ill-fitting activities. The paper analyses the conditions where divestment may be an appropriate course of action for organisational management.