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What Limits Decentralization at Russian Firms?


  • Levina, Irina A.

    (National Research University Higher School of Economics)


The paper investigates the influence of institutional factors on decentralization of decision-making at Russian firms. Decentralization is important for firms’ growth and development. While in the absence of decentralization a firm’s growth opportunities are limited by time and abilities of its CEO, decentralization opens doors for quicker decision-making on a larger range of questions and creates room for the firm’s growth. However, decentralization is associated with agency risks and risks of information leakage. Weak judicial system, high corruption, and low level of trust increase risks associated with decentralization and, therefore, can significantly limit firms’ opportunities for decentralization. In this paper the author empirically explores the influence of corruption, quality of court system and trust on decentralization of decision-making at firms in the Russian regions. The empirical analysis presented in the paper demonstrates the important limiting influence of corruption on decentralization of decision-making at Russian firms. In the regions with higher corruption firms are less likely to decentralize and more likely to choose a management model with centralized decision-making and selection of people for top positions through connections. At the same time, the presented analysis does not reveal any significant influence of the court system’s quality or the level of trust in the Russian regions on the probability of decentralization at Russian firms.

Suggested Citation

  • Levina, Irina A., 2017. "What Limits Decentralization at Russian Firms?," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 62-79, October.
  • Handle: RePEc:rnp:ecopol:ep1754

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    References listed on IDEAS

    1. Nicholas Bloom & Benn Eifert & Aprajit Mahajan & David McKenzie & John Roberts, 2013. "Does Management Matter? Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 128(1), pages 1-51.
    2. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1351-1408.
    3. Levina, Irina, 2016. "By connection or by competition? Decentralization of decision-making and hiring strategies at Russian firms," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 43, pages 73-95.
    4. Daron Acemoglu & Philippe Aghion & Claire Lelarge & John Van Reenen & Fabrizio Zilibotti, 2007. "Technology, Information, and the Decentralization of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1759-1799.
    5. Nicholas Bloom & Aprajit Mahajan & David McKenzie & John Roberts, 2010. "Why Do Firms in Developing Countries Have Low Productivity?," American Economic Review, American Economic Association, vol. 100(2), pages 619-623, May.
    6. Jakub Kastl & David Martimort & Salvatore Piccolo, 2013. "Delegation, Ownership Concentration and R&D Spending: Evidence From Italy," PSE - Labex "OSE-Ouvrir la Science Economique" hal-00813160, HAL.
    7. Phillipe Aghion & Nicholas Bloom & John Van Reenen, 2014. "Incomplete Contracts and the Internal Organization of Firms," Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(suppl_1), pages 37-63.
    8. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2010. "Recent Advances in the Empirics of Organizational Economics," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 105-137, September.
    9. Nicholas Bloom & Raffaella Sadun, 2012. "The Organization of Firms Across Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 127(4), pages 1663-1705.
    10. Athanasouli, Daphne & Goujard, Antoine, 2015. "Corruption and management practices: Firm level evidence," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 1014-1034.
    11. Левина Ирина Александровна, 2014. "Мотивы Руководителей, Модель Управления И Результаты Деятельности Фирмы," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 18(3), pages 429-453.
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    More about this item


    decentralization of decision-making; hiring for top positions; quality of institutions; corruption.;

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements


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