Organizing to adapt and compete

Ricardo Alonso, Wouter Dessein and Niko Matouschek

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

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.

Keywords: adaptation; information; organization (search for similar items in EconPapers)
JEL-codes: D23 D83 L23 (search for similar items in EconPapers)
Date: 2015-05-01
New Economics Papers: this item is included in nep-com and nep-mic
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Citations: View citations in EconPapers (30)

Published in American Economic Journal: Microeconomics, 1, May, 2015, 7(2), pp. 158-187. ISSN: 1945-7669

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Journal Article: Organizing to Adapt and Compete (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:58647

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