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Centralization vs. Decentralization in a Multi-Unit Organization: A Computational Model of a Retail Chain as a Multi-Agent Adaptive System

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Author Info

  • Myong-Hun Chang

    ()
    (Department of Economics, Cleveland State University, Cleveland, Ohio 44115)

  • Joseph E. Harrington

    ()
    (Department of Economics, The Johns Hopkins University, Baltimore, Maryland 21218)

Abstract

A computational model of a retail chain is developed in which store managers continually search for better practices. Search takes place over a rugged landscape defined over the space of store practices. The main objective of this research is to determine how the amount of discretion given to store managers as to how they run their stores influences the rate of innovation at the store level. We find that greater decentralization enhances firm performance when stores' markets are sufficiently different, the horizon is sufficiently long, and markets are sufficiently stable.

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File URL: http://dx.doi.org/10.1287/mnsc.46.11.1427.12085
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 46 (2000)
Issue (Month): 11 (November)
Pages: 1427-1440

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Handle: RePEc:inm:ormnsc:v:46:y:2000:i:11:p:1427-1440

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Related research

Keywords: organizational structure; decentralization; innovation; retail chain;

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Cited by:
  1. Chowdhury, Sanjib, 2011. "The moderating effects of customer driven complexity on the structure and growth relationship in young firms," Journal of Business Venturing, Elsevier, vol. 26(3), pages 306-320, May.
  2. Giannoccaro, Ilaria, 2011. "Assessing the influence of the organization in the supply chain management using NK simulation," International Journal of Production Economics, Elsevier, vol. 131(1), pages 263-272, May.
  3. Nobuyuki Hanaki & Jason Barr, 2005. "Firm Structure, Search and Environmental Complexity," Computing in Economics and Finance 2005 222, Society for Computational Economics.
  4. Lichtenthaler, Ulrich, 2010. "Organizing for external technology exploitation in diversified firms," Journal of Business Research, Elsevier, vol. 63(11), pages 1245-1253, November.
  5. Chang, Myong-Hun & Harrington, Joseph Jr., 2006. "Agent-Based Models of Organizations," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 26, pages 1273-1337 Elsevier.
  6. He, Zhou & Wang, Shouyang & Cheng, T.C.E., 2013. "Competition and evolution in multi-product supply chains: An agent-based retailer model," International Journal of Production Economics, Elsevier, vol. 146(1), pages 325-336.

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