Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 25

Advanced Interconnect Manufacturing Inc. (AIM) is an independent company. It is located in the Elmgrove plant at Kodak. It was formerly owned by Kodak, but was purchased by five managers (with the help of outside investors). AIM assembles wire harnesses for use in machines such as copiers and X-ray machines. The vice president of the company claims that the company is more efficient because, "as an independent company, AIM doesn't have to share any of Kodak's corporate overhead." As he notes, "Kodak's CEO doesn't get paid by us."
a. Evaluate the vice president's explanation for the increased efficiency of AIM since the ownership was changed.