One boss or many? Decision making and coordination in the multi-plant firm
AbstractMulti-plant organizations have trouble including both local and global information in their decisions. Outlets know local conditions but headquarters is able to coordinate outlets. In allocating decision-making power, firms must balance coordination and flexibility. I model this tradeoff, and show that the decentralized firm may standardize to avoid costs due to miscoordination. That is, increasingly variable local conditions cause ecentralized choices to become less variable. Ex ante, decentralization is more profitable; neither form dominates ex post. Signals from outlets to headquarters improve the performance of the centralized firm, but one can always find conditions under which decentralization is preferred.
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Bibliographic InfoPaper provided by Utah State University, Department of Economics in its series Working Papers with number 2000-32.
Length: 24 pages
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decentralization; information; multi-plant firms;
Find related papers by JEL classification:
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-12 (All new papers)
- NEP-BEC-2006-08-12 (Business Economics)
- NEP-CSE-2006-08-12 (Economics of Strategic Management)
- NEP-MIC-2006-08-12 (Microeconomics)
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