 Turbulence, Firm Decentralization, and Growth in Bad TimesPhilippe Aghion (),
Nicholas Bloom,
Brian Lucking,
Raffaella Sadun and
John van Reenen
Post-Print from HAL Abstract: What is the optimal form of firm organization during "bad times"? The greater turbulence following macro shocks may benefit decentralized firms because the value of local information increases (the "localist" view). On the other hand, the need to make tough decisions may favor centralized firms (the "centralist" view). Using two large micro datasets on decentralization in firms in ten OECD countries (WMS) and US establishments (MOPS administrative data), we find that firms that delegated more power from the central headquarters to local plant managers prior to the Great Recession outperformed their centralized counterparts in sectors that were hardest hit by the subsequent crisis (as measured by export growth and product durability). Results based on measures of turbulence based on product churn and stock market volatility provide further support to the localist view. This conclusion is robust to alternative explanations such as managerial fears of bankruptcy and changing coordination costs. Although decentralization will be suboptimal in many environments, it does appear to be beneficial for the average firm during bad times. Date: 2021-01 Published in American Economic Journal: Applied Economics, 2021, 13 (1), pp.133-169. ⟨10.1257/app.20180752⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-03166697 DOI: 10.1257/app.20180752 Access Statistics for this paper More papers in Post-Print from HAL |
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