Intra and Interorganizational Determinants of Decentralization

Abstract

A model combining structural and interorganizational causes of the decentralization of decision-making was constructed to investigate the merits of intra versus interorganizational determinants of decentralization in organizations. Relationships in the model were estimated with data from a sample of American corporations. The estimated parameters of the model, despite high zero-order correlations for all relationships, suggested a more parsimonious explanation of decentralization than is currently offered by existing research literature. Findings partially confirm and refute past research which has sought solely environmental or structural explanations. More important, the findings integrate and render some past findings consistent. It is concluded that decentralization of decision-making in corporations is more the consequence of geographical dispersion and coalition formation than other aspects of structure, size, and other features of interorganizational relations, such as competition. These latter factors appear to affect decentralization only indirectly and then through the geographical dispersion of a corporation. An adequate explanation of decentralization, therefore, requires a multidimensional approach that includes both inter and intraorganizational causes. Along with other recent work, this study offers additional evidence of the major theoretical importance of geographical differentiation, an often ignored concept, in understanding complex organizations.