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Incomplete contracts and the internal organisation of firms

Aghion, Philippe, Van Reenen, John and Bloom, Nicholas (2013) Incomplete contracts and the internal organisation of firms. CEP Occasional Papers (CEPOP36). The London School of Economics and Political Science, Center of Economic Performance, London, UK.

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Abstract

We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making within firms. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap.

Item Type: Monograph (Report)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2013 The Authors
Divisions: Economics
Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 17 Jul 2014 15:46
Last Modified: 18 Sep 2019 23:10
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/57987

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