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Governing Adaptation

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Author Info
HEIKKI RANTAKARI
Abstract

To remain competitive, an organization must both respond to information about its environment and coordinate its activities. We analyse how the allocation of decision rights within an organizational hierarchy influences the organization's ability to solve such problems of coordinated adaptation when information is both soft and distributed inside the organization and the organizational participants behave strategically. The results show that, contrary to the common intuition, the performance differential between centralized and decentralized decision-making is non-monotone in the importance of coordination. Further, both these common structures are dominated by asymmetric structures in sufficiently asymmetric environments (such as a small division developing a new product in the presence of a large division with an established product). Finally, if the incentive conflicts between the participants can be made sufficiently small, centralized decision-making is always dominated by decentralized decision-making. Copyright © 2008 The Review of Economic Studies Limited.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-937X.2008.00518.x
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Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 75 (2008)
Issue (Month): 4 (October)
Pages: 1257-1285
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bla:restud:v:75:y:2008:i:4:p:1257-1285

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  1. Oliver Hart & Bengt Holmstrom, 2008. "A Theory of Firm Scope," NBER Working Papers 14613, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Otto H. Swank & Bauke Visser, 2009. "Decision Making and Learning in a Globalizing World," Economics Working Papers ECO2009/20, European University Institute. [Downloadable!]
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This page was last updated on 2009-11-22.

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