IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/58647.html
   My bibliography  Save this paper

Organizing to adapt and compete

Author

Listed:
  • Alonso, Ricardo
  • Dessein, Wouter
  • Matouschek, Niko

Abstract

We examine the relationship between the organization of a multi-divisional firm and its ability to adapt production decisions to changes in the environment. We show that even if lower-level managers have superior information about local conditions, and incentive conflicts are negligible, a centralized organization can be better at adapting to local information than a decentralized one. As a result, and in contrast to what is commonly argued, an increase in product market competition that makes adaptation more important can favor centralization rather than decentralization.

Suggested Citation

  • Alonso, Ricardo & Dessein, Wouter & Matouschek, Niko, 2015. "Organizing to adapt and compete," LSE Research Online Documents on Economics 58647, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:58647
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/58647/
    File Function: Open access version.
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jeanne Hagenbach & Frédéric Koessler, 2010. "Strategic Communication Networks," Review of Economic Studies, Oxford University Press, vol. 77(3), pages 1072-1099.
    2. Gary S. Becker & Kevin M. Murphy, 1994. "The Division of Labor, Coordination Costs, and Knowledge," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, Third Edition, pages 299-322 National Bureau of Economic Research, Inc.
    3. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    4. Gertner, Robert H & Stillman, Robert S, 2001. "Vertical Integration and Internet Strategies in the Apparel Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 49(4), pages 417-440, December.
    5. Pol Antràs & Esteban Rossi-Hansberg, 2009. "Organizations and Trade," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 43-64, May.
    6. Susan Athey & Scott Stern, 2002. "The Impact of Information Technology on Emergency Health Care Outcomes," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 399-432, Autumn.
    7. Patrick Bolton & Mathias Dewatripont, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 809-839.
    8. Guido Friebel & Michael Raith, 2010. "Resource Allocation and Organizational Form," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 1-33, May.
    9. Wouter Dessein & Luis Garicano & Robert Gertner, 2010. "Organizing for Synergies," American Economic Journal: Microeconomics, American Economic Association, vol. 2(4), pages 77-114, November.
    10. Philippe Aghion & Mathias Dewatripont & Patrick Rey, 2004. "Transferable Control," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 115-138, March.
    11. Robert H. Gertner & Robert S. Stillman, 2001. "Vertical Integration and Internet Strategies in the Apparel Industry," NBER Chapters,in: E-commerce, pages 417-440 National Bureau of Economic Research, Inc.
    12. Jacques Crémer & Luis Garicano & Andrea Prat, 2007. "Language and the Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 373-407.
    13. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2010. "Does Product Market Competition Lead Firms to Decentralize?," American Economic Review, American Economic Association, vol. 100(2), pages 434-438, May.
    14. Wouter Dessein & Tano Santos, 2006. "Adaptive Organizations," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 956-985, October.
    15. Daniel Ferreira & Raaj K. Sah, 2012. "Who gets to the top? Generalists versus specialists in managerial organizations," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 577-601, December.
    16. Schmidt, Klaus M., 1996. "Managerial Incentives and Product Market Competition," CEPR Discussion Papers 1382, C.E.P.R. Discussion Papers.
    17. Ying Chen & Sidartha Gordon, 2015. "Information transmission in nested sender–receiver games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 58(3), pages 543-569, April.
    18. Wouter Dessein, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 811-838.
    19. Massimo G. Colombo & Marco Delmastro, 2004. "Delegation of Authority In Business Organizations: An Empirical Test," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 53-80, March.
    20. repec:mes:jeciss:v:30:y:1996:i:4:p:1212-1216 is not listed on IDEAS
    21. Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 191-213.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Petros G. Sekeris & Dimitrios Xefteris, 2018. "Delegating decisions to organizations," University of Cyprus Working Papers in Economics 15-2018, University of Cyprus Department of Economics.
    2. Asuyama, Yoko, 2016. "Delegation to workers across countries and industries : social capital and coordination needs matter," IDE Discussion Papers 620, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. repec:eee:jeborg:v:155:y:2018:i:c:p:315-348 is not listed on IDEAS

    More about this item

    Keywords

    adaptation; information; organization;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:58647. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (LSERO Manager). General contact details of provider: http://edirc.repec.org/data/lsepsuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.