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Incomplete Contracts and the Internal Organisation of Firms

Phillipe Aghion, Nicholas Bloom () and John van Reenen ()

CEP Occasional Papers from Centre for Economic Performance, LSE

Abstract: We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making within firms. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap.

Keywords: uncertainty (search for similar items in EconPapers)
JEL-codes: E3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cdm and nep-com
Date: 2013-03
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Related works:
Journal Article: Incomplete Contracts and the Internal Organization of Firms (2014) Downloads
Working Paper: Incomplete contracts and the internal organization of firms (2014) Downloads
Working Paper: Incomplete contracts and the internal organisation of firms (2013) Downloads
Working Paper: Incomplete Contracts and the Internal Organization of Firms (2013) Downloads
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