Organizing to adapt and compete

Ricardo Alonso, Wouter Dessein, Niko Matouschek

Research output: Contribution to journalArticle

13 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)158-187
Number of pages30
JournalAmerican Economic Journal: Microeconomics
Volume7
Issue number2
DOIs
Publication statusPublished - Jan 1 2015

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ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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