Firm Size, Strategic Communication, and Organization
نویسنده
چکیده
This paper studies the relationship between firm size and the optimal organization structure by extending the two-division model of Alonso et. al (2008) to finite number of divisions. The firm must resolve the tradeoff between coordination and adaptation; relevant information for decision making is dispersed and communication is strategic. We compare the overall performance of centralization and decentralization as the size of the firm grows and show that the impact of firm size on the optimal organization structure depends on divisional managers’own-division bias and the incentive need of coordination. In an extension endogenize the number of divisions or the optimal size of the firm.
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