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POID Research

Power in the firm

Team Leaders: Daron Acemoglu, John Van Reenen, Sean Wang

One of the most important aspects of firms is how power is organized. Which agents how which powers? How much is centralized and how much is delegated? Moreover, does decentralization aid the adoption of new technologies and economic performance?

We have rich data on the power structures within firms from the multiple management surveys we have conducted such as the WMS and the MOPS. One aspect of the project is simply to describe the variation in power structures and how this has changed over time. There is a feeling that power has become increasingly decentralized, but is this true or just corporate propaganda? We are working on "Who's got the Power? Decentralization from headquarters to plant managers".

The next step of the project is to examine what the long-term impact of decentralization is on firm and macro-economic performance. If there is too much power hoarding at the top, for example, exogenous shocks to decentralization should improve the long-run growth of firms. We use changes in the M&A market to provide some of this quasi-exogenous variation to map out the impact of decentralization shocks on establishment performance over the last 15-20 years.

The paper is provisionally entitled "The Adaptable Organization" and authored by Daron Acemoglu, Scott Ohlmacher, John Van Reenen and Sean Wang.

The theoretical and empirical framework for this has been partly laid out in earlier work:

"Turbulence, Firm Decentralization and Growth in Bad Times" (Aghion, Bloom, Lucking, Sadun and Van Reenen)

"Come Together: Integration, Delegation and Management" (Van Reenen, Alfaro, Bloom, Conconi, Fadinger, Legros, Newman, and Sadun).