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Governing Adaptation -super-1

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  • Heikki Rantakari
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    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, Wiley-Blackwell.

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    Bibliographic Info

    Article provided by Oxford University Press in its journal The Review of Economic Studies.

    Volume (Year): 75 (2008)
    Issue (Month): 4 ()
    Pages: 1257-1285

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    Handle: RePEc:oup:restud:v:75:y:2008:i:4:p:1257-1285

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    Cited by:
    1. Baniak Andrzej & Grajzl Peter, 2011. "Interjurisdictional Linkages and the Scope for Interventionist Legal Harmonization," Review of Law & Economics, De Gruyter, vol. 7(2), pages 405-434, December.
    2. Choe, Chongwoo & In-Uck, Park, 2010. "Information, Authority, and Corporate Hierarchies," MPRA Paper 21865, University Library of Munich, Germany.
    3. Kräkel, Matthias, 2013. "Authority and Incentives in Organizations," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 412, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    4. Otto H. Swank & Bauke Visser, 2010. "Decision Making and Learning in a Globalizing World," Tinbergen Institute Discussion Papers 10-034/1, Tinbergen Institute.
    5. Ralph Boleslavsky & Tracy R. Lewis, 2011. "Advocacy and Dynamic Delegation," Working Papers 2011-7, University of Miami, Department of Economics.
    6. Chongwoo Choe & In-Uck Park, 2012. "Information Transmission through Influence Activities," Development Research Unit Working Paper Series 53-12, Monash University, Department of Economics.
    7. Di Maggio, Marco, 2009. "Accountability and Cheap Talk," MPRA Paper 18652, University Library of Munich, Germany.
    8. John R. Graham & Campbell R. Harvey & Manju Puri, 2011. "Capital Allocation and Delegation of Decision-Making Authority within Firms," NBER Working Papers 17370, National Bureau of Economic Research, Inc.
    9. repec:dgr:uvatin:2010034 is not listed on IDEAS
    10. Andrea Galeotti & Christian Ghiglino & Francesco Squintani, 2009. "Strategic Information Transmission in Networks," Economics Discussion Papers 668, University of Essex, Department of Economics.
    11. Loeper, Antoine, 2011. "Coordination in heterogeneous federal systems," Journal of Public Economics, Elsevier, vol. 95(7), pages 900-912.
    12. Silvia Marchesi & Laura Sabani, 2013. "Does it take two to tango? How to improve cooperation between the IMF and the World Bank," Working Papers 232, University of Milano-Bicocca, Department of Economics, revised Feb 2013.
    13. Oliver Hart & Bengt Holmstrom, 2010. "A Theory of Firm Scope," The Quarterly Journal of Economics, MIT Press, vol. 125(2), pages 483-513, May.

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