On the design of hierarchies: coordination versus specialization

Oliver Hart and John Moore

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We develop a model of hierarchies based on the allocation of authority. A firm's owners have ultimate authority over a firm's decisions, but they have limited time or capacity to exercise this authority. Hence owners must delegate authority to subordinates. However, these subordinates also have limited time or capacity and so further delegation must occur. We analyze the optimal chain of command given that different agents have different tasks: some agents are engaged in coordination and others in specialization. Our theory throws light on the nature of hierarchy, the optimal degree of decentralization, and the boundaries of the firm.

Keywords: organisations; hierarchies; coordination; specialisation (search for similar items in EconPapers)
JEL-codes: D23 L22 (search for similar items in EconPapers)
Pages: 53 pages
Date: 1999-10
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Citations: View citations in EconPapers (27)

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http://eprints.lse.ac.uk/19340/ Open access version. (application/pdf)

Related works:
Journal Article: On the Design of Hierarchies: Coordination versus Specialization (2005)
Working Paper: On the Design of Hierarchies: Coordination versus Specialization (2005)
Working Paper: On the Design of Hierarchies: Coordination Versus Specialization (2005)
Working Paper: On the Design of Hierarchies: Coordination Versus Specialization (1999)
Working Paper: On the Design of Hierarchies: Coordination Versus Specialization (1999)
Working Paper: On the Design of Hierarchies: Coordination Versus Specialization (1999)
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