Coordination and Organization Design: Theory and Micro-Evidence

Wouter Dessein, Desmond (Ho-Fu) Lo and Chieko Minami

American Economic Journal: Microeconomics, 2022, vol. 14, issue 4, 804-43

Abstract: We explore the relationship between the volatility of a firm's local environment and its organizational structure. Using micro-level data on managers working for a large retailer, we empirically test and provide support for our theory that a more volatile local environment results in more decentralization only when the need for coordination among subunits is low. In contrast, more local volatility is associated with more centralization when coordination needs are high. Our evidence supports the argument that centralized organizations are better at adapting to local shocks when coordination is important.

JEL-codes: D22 L23 L81 M11 M54 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1257/mic.20200307

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