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When Does Coordination Require Centralization?
Open accessAbstract
This paper compares centralized and decentralized coordination when managers are privately informed and communicate strategically. We consider a multidivisional organization in which decisions must be adapted to local conditions but also coordinated with each other. Information about local conditions is dispersed and held by self-interested division managers who communicate via cheap talk. The only available formal mechanism is the allocation of decision rights. We show that a higher need for coordination improves horizontal communication but worsens vertical communication. As a result, decentralization can dominate centralization even when coordination is extremely important relative to adaptation. (JEL D23, D83, L23, M11)
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Cited by
Introduction—Platforms and Infrastructures in the Digital Age
Constantinides, P., Henfridsson, O., & Parker, G. G. (2018) · Information Systems Research · doi:10.1287/isre.2018.0794 · Cited by 943
Common Ownership, Competition, and Top Management Incentives
Anton, M., Ederer, F., Gine, M., & Schmalz, M. C. (2016) · doi:10.2139/ssrn.2802332 · Cited by 150
Bernacchio, C., & Foss, N. (2024) · doi:10.2139/ssrn.4736313 · Cited by 17
Metadata
- Authors
- Alonso, R., Dessein, W., & Matouschek, N.
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2008-03-01
- Volume
- 98
- Issue
- 1
- Pages
- 145-179
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W2298519506
- Cited by
- 623
- References
- 0
- FWCI
- 45.10
- Type
- journal article
- Language
- en
- Open access
- bronze
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- Alonso, R., Dessein, W., & Matouschek, N. (2008). When Does Coordination Require Centralization? American Economic Review. https://doi.org/10.1257/aer.98.1.145
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
