EconPapers    
Economics at your fingertips  
 

Turbulence, Firm Decentralization and Growth in Bad Times

Philippe Aghion, Nicholas Bloom (), Brian Lucking, Raffaella Sadun () and John van Reenen ()

No 11979, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: What is the optimal form of firm organization during "bad times"? Using two large micro datasets on firm decentralization from US administrative data and 10 OECD countries, we find that firms that delegated more power from the Central Headquarters to local plant managers prior to the Great Recession out-performed their centralized counterparts in sectors that were hardest hit by the subsequent crisis. We present a model where higher turbulence benefits decentralized firms because the value of local information and urgent action increases. Since turbulence rises in severe downturns, decentralized firms do relatively better. We show that the data support our model over alternative explanations such as recession-induced reduction in agency costs (due to managerial fears of bankruptcy) and changing coordination costs. Countries with more decentralized firms (like the US) weathered the 2008-09 Great Recession better: these organizational differences could account for about 16% of international differences in post-crisis GDP growth.

Keywords: Decentralization; great recession; growth; turbulence (search for similar items in EconPapers)
JEL-codes: F23 O31 O32 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hrm and nep-tid
Date: 2017-04
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11979 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Turbulence, Firm Decentralization and Growth in Bad Times (2017) Downloads
Working Paper: Turbulence, Firm Decentralization and Growth in Bad Times (2017) Downloads
Working Paper: Turbulence, firm decentralization and growth in bad times (2017) Downloads
Working Paper: Turbulence, Firm Decentralization and Growth in Bad Times (2017) Downloads
Working Paper: Turbulence, Firm Decentralization and Growth in Bad Times (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11979

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=11979

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ..
Series data maintained by (). This e-mail address is bad, please contact .

 
Page updated 2017-12-12
Handle: RePEc:cpr:ceprdp:11979