Abstract

The aim of this paper is to examine the factors influencing the allocation of decisional power inside the firm. While decisional rights are conferred directly through the ownership of assets, the owners often choose to delegate some decisional power to other subjects inside the organization, such as managers, workers etc. In relation to this choice different organizational structures emerge, characterized by different degrees of workers' autonomy. In this paper the firms' tendency, observed in the last decades, to favor decentralization is examined through a review of the economic literature that interprets the organizational form in relation to the allocation of decisional rights. We distinguish between two main approaches. The first, abstracting from incentive problems, focuses on co-ordination problems taking into account the costs of acquisition, processing and communication of information, the delays and errors in decisionmaking, the advantages from specialization etc. The second, based on the hypothesis that the principal and the agent have divergent objectives, analyses benefits and costs of delegating the decisional power to agents in relation to the influence that this choice produces on incentives, on the use of information and on expropriation costs.