Organizing to adapt and compete

Alonso, Ricardo, Dessein, Wouter and Matouschek, Niko (2015) Organizing to adapt and compete. American Economic Journal: Microeconomics, 7 (2). pp. 158-187. ISSN 1945-7669

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Abstract

We examine the relationship between the organization of a multi-divisional firm and its ability to adapt production decisions to changes in the environment. We show that even if lower-level managers have superior information about local conditions, and incentive conflicts are negligible, a centralized organization can be better at adapting to local information than a decentralized one. As a result, and in contrast to what is commonly argued, an increase in product market competition that makes adaptation more important can favor centralization rather than decentralization.

Item Type:	Article
Official URL:	http://www.aeaweb.org/aej-micro/
Additional Information:	© 2014 American Economic Association
Library of Congress subject classification:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HE Transportation and Communications
Journal of Economic Literature Classification System:	D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production
Sets:	Departments > Management Research centres and groups > Managerial Economics and Strategy Group
Date Deposited:	05 Aug 2014 09:48
URL:	http://eprints.lse.ac.uk/58647/

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