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Centralization vs. Decentralization in a Multi-Unit Organization: A Computational Model of a Retail Chain as a Multi-Agent Adaptive System

  • Myong-Hun Chang
  • Joseph E. Harrington Jr.

A computational model of a retail chain is developed in which store managers continually search for better practices. Search takes place over a rugged landscape defined over the space of store practices. The main objective of this research is to determine how the amount of discretion given to store managers, as to how they run their stores, influences the rate of innovation at the store level. We find that greater decentralization enhances firm performance when stores' markets are sufficiently different, the horizon is sufficiently long, and market are sufficiently stable.

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Paper provided by Santa Fe Institute in its series Working Papers with number 00-02-010.

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Date of creation: Feb 2000
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Handle: RePEc:wop:safiwp:00-02-010
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  1. Cohen, Michael D., 1981. "The power of parallel thinking," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 285-306, December.
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  6. Julio J. Rotemberg, 1999. "Process- Versus Function-Based Hierarchies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(4), pages 453-487, December.
  7. Levinthal, Daniel & March, James G., 1981. "A model of adaptive organizational search," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 307-333, December.
  8. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September.
  9. Epple, D. & Argote, L. & Darr, E.D., 1995. "The Acquisition, Transfer and Depreciation of Knowledge in Service Organisations: Productivity in Franchises," GSIA Working Papers 1995-16, Carnegie Mellon University, Tepper School of Business.
  10. Eric D. Darr & Linda Argote & Dennis Epple, 1995. "The Acquisition, Transfer, and Depreciation of Knowledge in Service Organizations: Productivity in Franchises," Management Science, INFORMS, vol. 41(11), pages 1750-1762, November.
  11. Philippe Jehiel, 1999. "Information Aggregation and Communication in Organizations," Management Science, INFORMS, vol. 45(5), pages 659-669, May.
  12. Helmy H. Baligh & Richard M. Burton & Børge Obel, 1996. "Organizational Consultant: Creating a Useable Theory for Organizational Design," Management Science, INFORMS, vol. 42(12), pages 1648-1662, December.
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