Work

Incomplete Contracts and the Internal Organization of Firms

Year: 2013

Type: article

Abstract: We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital, and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap (JEL O31, O32, O33, F23).

Source: The Journal of Law Economics and Organization

DOI: 10.1093/jleo/ewt003

Authors: P. Aghion, N. Bloom, J. Van Reenen

Institutions: Harvard University, Stanford University, London School of Economics and Political Science

Language: English

Topic: Outsourcing and Supply Chain Management

Subfield: Management Information Systems

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: bronze

Funder: Economic and Social Research Council