The Quality of Managers in Centralized versus Decentralized Organizations

10 Pages Posted: 27 Jun 2012

See all articles by Raaj Kumar Sah

Raaj Kumar Sah

University of Chicago

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: April 1990

Abstract

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

Sah, Raaj Kumar and Stiglitz, Joseph E., The Quality of Managers in Centralized versus Decentralized Organizations (April 1990). Quarterly Journal of Economics, Vol. 106, No. 1, 1991; Yale University Economic Growth Center Discussion Paper No. 624. Available at SSRN: https://ssrn.com/abstract=2085894

Raaj Kumar Sah (Contact Author)

University of Chicago ( email )

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Joseph E. Stiglitz

Columbia Business School - Finance and Economics ( email )

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