Organizing to Adapt and Compete
American Economic Journal: Microeconomics
vol. 7,
no. 2, May 2015
(pp. 158-87)
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. (JEL D21, D23, F23, L22)Citation
Alonso, Ricardo, Wouter Dessein, and Niko Matouschek. 2015. "Organizing to Adapt and Compete." American Economic Journal: Microeconomics, 7 (2): 158-87. DOI: 10.1257/mic.20130100Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D23 Organizational Behavior; Transaction Costs; Property Rights
- F23 Multinational Firms; International Business
- L22 Firm Organization and Market Structure
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