Incomplete Contracts and the Internal Organization of Firms

Philippe Aghion, Nicholas Bloom and John van Reenen

No 18842, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making within firms. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap.

JEL-codes: D21 D22 D23 L22 (search for similar items in EconPapers)
Date: 2013-02
Note: IO LS PR
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Citations: View citations in EconPapers (22)

Published as Phillipe Aghion & Nicholas Bloom & John Van Reenen, 2014. "Incomplete Contracts and the Internal Organization of Firms," Journal of Law, Economics and Organization, Oxford University Press, vol. 30(suppl_1), pages i37-i63.

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Related works:
Journal Article: Incomplete Contracts and the Internal Organization of Firms (2014)
Working Paper: Incomplete contracts and the internal organization of firms (2014)
Working Paper: Incomplete Contracts and the Internal Organisation of Firms (2013)
Working Paper: Incomplete contracts and the internal organisation of firms (2013)
Working Paper: Incomplete Contracts and the Internal Organization of Firms (2013)
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