Shedding new light on the organization : an empirical analysis of some key aspects of business organizations
There is a striking difference between the large number of theoretical papers on firm organization and the lack of quantitative empirical evidence. If on the one side economists are increasingly concerned with organization of firms, on the other side organization still remains an ambiguous concept, hardly analyzed empirically. In this thesis I develop a new empirical methodology based upon business history (see Chapter 1) and previous theoretical work which allows me to describe (some aspects of) the organization of firms in quantitative terms. This approach is instrumental to analyzing the hierarchical structure and the allocation of decision-making activities in a sample composed of 438 Italian metalworking plants. I also study the dynamics of firm organization in the 1980s and 1990s. The results of Chapter 2 show that the (static) choice of the organizational form crucially relies upon the "loss of control phenomenon". They also illustrate that the dynamics of hierarchical structure follows an inertial process, characterized by incremental adjustments. Lastly, both the organization and, more interestingly, its evolution differ from one category of plant to another depending crucially on plant size. Moreover, I test (some of) the predictions of economic theory on the size of the management hierarchy (Chapter 3), the allocation of real and formal authority (Chapter 4), and structural inertia (Chapter 6) through the estimates of econometric models (i. e., multinomial logit, ordered logit, and survival). The findings of Chapter 3 show that the plant size, the characteristics (i. e., vintage and extent of use) of the production and communication technology in use, the plant's ownership status (i. e., State versus private ownership, and differences in the nationality of firms to which plants belong) are key in explaining the complexity of a plant's management hierarchy. In addition, in accordance with theoretical work, the findings of Chapter 4 show that the size of a plant's organization, the characteristics of the production and communication technologies in use, the urgency of decisions, and the presence of monetary incentive schemes aligning plant manager's objectives with those of the firm as a whole figure prominently in explaining whether authority is delegated to the plant manager or not. The structural and organizational characteristics of a plant's parent firm do also play a role, with the likelihood of decentralization of decision-making increasing with parent firm's size and decreasing with the adoption by the parent firm of a M-form type of organization. Lastly, the nature of the decision turns out to affect the allocation of formal authority, with decisions concerning the labor force being more frequently delegated to plant managers than those related to investments in capital equipment. On the contrary, it does not influence the allocation of real authority when the formal right to decide remains with the corporate superior. Finally in Chapter 61 find that both influence activities and technology adoptions are key in explaining the evolution of business organizations. Influence activities tend to inhibit organizational change causing structural inertia, whilst the technology adoptions increase the likelihood of changing the structure of the management hierarchy.