NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

On the Design of Hierarchies: Coordination Versus Specialization

Oliver Hart, John Moore

NBER Working Paper No. 7388
Issued in October 1999
NBER Program(s):   CF

We develop a model of hierarchies based on the allocation of authority. A firm's owners have ultimate authority over a firm's decisions, but they have limited time or capacity to exercise this authority. Hence owners must delegate authority to subordinates. However, these subordinates also have limited time or capacity and so further delegation must occur. We analyze the optimal chain of command given that different agents have different tasks: some agents are engaged in coordination and others in specialization. Our theory throws light on the nature of hierarchy, the optimal degree of decentralization, and the boundaries of the firm.

download in pdf format
   (359 K)

email paper

This paper is available as PDF (359 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w7388

Published: Oliver Hart & John Moore, 2005. "On the Design of Hierarchies: Coordination versus Specialization," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 675-702, August. citation courtesy of

Users who downloaded this paper also downloaded these:
Rajan and Zingales w7546 The Firm as a Dedicated Hierarchy: A Theory of the Origin and Growth of Firms
Frankel w7338 No Single Currency Regime is Right for All Countries or At All Times
Comin w17902 An Exploration of Luxury Hotels in Tanzania
Graham, Harvey, and Puri w17370 Capital Allocation and Delegation of Decision-Making Authority within Firms
Rajan and Wulf w9633 The Flattening Firm: Evidence from Panel Data on the Changing Nature of Corporate Hierarchies
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us