Evidence from Canadian, Australian and UK Establishments

The optimal allocation of decision rights in an organization reflects a trade-off between the costs of transferring relevant information within the hierarchy and the costs that occur when decision-making agents have different objectives than the principal. This paper is a first attempt to quantitatively analyze the allocation of decision rights within the workplace. I use detailed questions on decision-making from three separate data sets to measure the decentralization of decision rights within the hierarchy, to determine what establishment characteristics are related to the location of decision rights, and to examine what human resource practices are correlated with centralization