Organizing to Adapt and Compete

Ricardo Alonso, Wouter Dessein and Niko Matouschek

American Economic Journal: Microeconomics, 2015, vol. 7, issue 2, 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)

JEL-codes: D21 D23 F23 L22 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/mic.20130100
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Citations: View citations in EconPapers (30)

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