The Quality of Managers in Centralized versus Decentralized Organizations
10 Pages Posted: 27 Jun 2012
Date Written: April 1990
This paper examines the dynamic consequences of a greater centralization or decentralization of the decision-making authority to appoint successor managers on the quality of managers actually appointed. Our main result is that a greater centralization results in a greater variability over time in the quality of managers. An intuitive reason for this is that though a highly capable manager may have large beneficial effects on the managerial choices within a centralized system, because this manager has greater authority in such a system, a highly incapable manager placed in the same position has correspondingly large deleterious effects.
Suggested Citation: Suggested Citation