Authors
Francisco Brahm, Jorge Tarziján
Publication date
2016/12
Journal
Strategic Management Journal
Volume
37
Issue
12
Pages
2481-2502
Publisher
John Wiley & Sons, Ltd
Description
Research summary: Two central issues in strategic management are the determination of a firm's internal delegation and its vertical boundaries. Despite the importance of these issues, there is scant analysis concerning their interaction. Using a comprehensive database of the construction industry, we show that vertical integration positively influences the centralization decision and that the main mechanism driving this relationship is an improvement in the hierarchically coordinated adaptation of firm activities when complexity and uncertainty are high. We also observe that centralization is negatively related to the extent of relational contracts between principals and agents, and positively related to an exogenous increase in the cost of employee layoffs. Our results suggest that managers cannot consider firm boundaries and internal organization to be independent decisions.
Managerial summary: We ask whether a …
Scholar articles
F Brahm, J Tarziján - Strategic Management Journal, 2016