Turbulence, firm decentralization and growth in bad times / Philippe Aghion (College de France, LSE and CEP), Nicholas Bloom (Stanford University, CEP, NBER, CEPR and IZA), Brian Lucking (Stanford University), Raffaella Sadun (Harvard University, CEP, CEPR and NBER), John van Reenen (MIT, CEP, NBER, CEPR and IZA) ; IZA, Institute of Labor Economics
VerfasserAghion, Philippe ; Bloom, Nick ; Lucking, Brian ; Sadun, Raffaella ; Van Reenen, John
KörperschaftForschungsinstitut zur Zukunft der Arbeit
ErschienenBonn, Germany : IZA Institute of Labor Economics, April 2017
Elektronische Ressource
Umfang1 Online-Ressource (57 Seiten) : Diagramme
SerieDiscussion paper ; no. 10706
 Das Dokument ist öffentlich zugänglich im Rahmen des deutschen Urheberrechts.
Turbulence, firm decentralization and growth in bad times [2.26 mb]
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What is the optimal form of firm organization during "bad times"? Using two large micro datasets on firm decentralization from US administrative data and 10 OECD countries, we find that firms that delegated more power from the Central Headquarters to local plant managers prior to the Great Recession out-performed their centralized counterparts in sectors that were hardest hit by the subsequent crisis. We present a model where higher turbulence benefits decentralized firms because the value of local information and urgent action increases. Since turbulence rises in severe downturns, decentralized firms do relatively better. We show that the data support our model over alternative explanations such as recession-induced reduction in agency costs (due to managerial fears of bankruptcy) and changing coordination costs. Countries with more decentralized firms (like the US) weathered the 2008-09 Great Recession better: these organizational differences could account for about 16% of international differences in post-crisis GDP growth.