Delegation in Multi-Establishment Firms: The Organizational Structure of I.T. Purchasing Authority
AbstractA rare large-scale empirical study of delegation within firms, this paper investigates how decision rights over information technology investments are allocated within multi-establishment firms. The core results indicate that a relatively high contribution to firm sales is highly correlated with authority being delegated to the local establishment. Firm-wide operational complexity and local information advantages are also associated with local discretion for IT purchases. Certain IT investments are also positively correlated with delegation. On the other hand, significant operational interdependencies evince a positive correlation with centralization, as do productive similarities among establishments. Surprisingly, absolute size of the firm and having a large IT budget are also correlated with centralized IT decision-making. With the exception of these latter effects, the results are consistent with models of organizational design that predict delegation where there is great demand for locally adapted choices and centralization where firm-wide coordination is most important. The findings document and make sense of widespread heterogeneity in decision rights across a range of firm and industry settings – even among establishments belonging to the same parent firm. Finally, they suggest important considerations for future empirical and theoretical research into the determinants of delegation.
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Bibliographic InfoPaper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 10-35.
Length: 51 pages
Date of creation: Oct 2010
Date of revision:
Find related papers by JEL classification:
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- M15 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - IT Management
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-20 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Van Zandt, Timothy, 1999. "Real-Time Decentralized Information Processing as a Model of Organizations with Boundedly Rational Agents," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 633-58, July.
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