Who Decides about Change and Restructuring in Organizations?

38 Pages Posted: 22 Sep 2008 Last revised: 3 Aug 2009

See all articles by Kieron Meagher

Kieron Meagher

Australian National University (ANU)

Andrew Wait

University of Sydney

Date Written: September 22, 2008


We model the determinants of who makes decisions, the principal or an agent, when there are multiple decisions. Decision making takes effort and time; and, once implemented, the expected loss from a particular decision (or project) increases with the length of time since the last decision was made. The model shows delegation is more likely as: (i) controllable uncertainty increases; (ii) uncontrollable uncertainty decreases; (iii) the number of plants in the firm decreases; (iv) the complexity of the decision increases; and (v) the importance of the decision increases. The theoretical predictions are consistent with our novel empirical results on the delegation of major organizational change decisions using workplace data. Our unique data allows us to identify who made a decision to implement a significant change, as well as key internal and external factors highlighted as potentially important in our theory. Empirically, delegation is more likely in organizations that: face a competitive product market; export; have predictable product demand; have a larger workplace; and that have fewer other workplaces in the same organization producing a similar output. We find business strategy is not related to the allocation of decision making authority; delegation, however, is associated with the use of human resource techniques such as the provision of bonuses to employees, decision making authority, decentralization.

Keywords: decision making authority, decentralization, delegation, competition, exports, uncertainty, principal and agent

JEL Classification: D23, L23, L29

Suggested Citation

Meagher, Kieron and Wait, Andrew, Who Decides about Change and Restructuring in Organizations? (September 22, 2008). Available at SSRN: https://ssrn.com/abstract=1271754 or http://dx.doi.org/10.2139/ssrn.1271754

Kieron Meagher (Contact Author)

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601

Andrew Wait

University of Sydney ( email )

School of Economics
University of Sydney, NSW 2006
+61-2-9351-3060 (Phone)
+61-2-9351-4341 (Fax)

HOME PAGE: http://sydney.edu.au/arts/economics/

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