Article | Journal of Economics & Management Strategy | Summer 2014

Delegation in Multi-Establishment Firms: Evidence from I.T. Purchasing

by Kristina Steffenson McElheran

Abstract

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.

Keywords: Management Practices and Processes; Adaptation; Cooperation;

Citation:

McElheran, Kristina Steffenson. "Delegation in Multi-Establishment Firms: Evidence from I.T. Purchasing." Journal of Economics & Management Strategy 23, no. 2 (Summer 2014): 225–258. (Lead Article.)