Organizing for strategy making: An information aggregation view

This study examines the process of strategic decision making within organizations by analyzing four commonly used information aggregation structures: individual decision making, delegation to experts, voting, and averaging of opinions. Using a formal mathematical model, we investigate how the performance of each of these structures is contingent upon the breadth of knowledge within the firm and changes in the environment. Our model builds on work done in the Carnegie tradition and in other decision-theoretic disciplines. We use the model to explore when delegation is preferable to the more “crowdlike” structures of voting and averaging. We show that delegation is the most effective only when there is diversity of expertise, when accurate delegation is possible, and when there is a good fit between the firm’s knowledge and the knowledge required by the environment. Otherwise, depending on the knowledge breadth of the firm, voting or averaging may be the most effective structure. Finally, we use our model to shed light on which structures are more robust to radical environmental change and also to answer calls for a better understanding of the microfoundations of strategy.