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Delegation in Multi‐Establishment Firms: Evidence from I.T. Purchasing
Author(s) -
McElheran Kristina
Publication year - 2014
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12054
Subject(s) - delegation , diversification (marketing strategy) , business , purchasing , industrial organization , agency (philosophy) , principal–agent problem , microeconomics , agency cost , adaptation (eye) , value (mathematics) , empirical evidence , economics , corporate governance , marketing , finance , management , computer science , philosophy , physics , epistemology , machine learning , optics , shareholder
Recent contributions to a growing theory literature have focused on the tradeoff between adaptation and coordination in determining delegation within firms. Empirical evidence, however, is limited. Using establishment‐level data on decision rights over information technology investments, I find that a high net value of adaptation is strongly associated with delegation, as are local information advantages and firm‐wide diversification; in contrast, a high net value of within‐firm coordination is correlated with centralization. Variation across establishments within firms is widespread: most firms are neither fully centralized nor fully decentralized. Delegation patterns are largely consistent with standard team‐theory predictions; however, certain findings, such as a negative correlation between delegation and firm size, call for a consideration of agency costs as well.