Abstract

Economists are increasingly interested on the internal working of the management hierarchy of business firms, and in particular on the determinants of the allocation of formal and real authority. In spite of the relevant number of papers which tackle theoretically this issue, empirical evidence is still scarce. This article is a first step towards a robust quantitative analysis of the determinants of the allocation of decision power within the management hierarchy of firms. In order to do so, we have gathered questionnaire data on the allocation of formal and real authority for a sample of 438 Italian manufacturing plants. Then we have proceeded to test the effects of a number of possible explanatory variables on the allocation of decision power through the estimates of multinomial logit models. Results show that factors such as ownership status, monitoring technology, size of the management hierarchy and urgency of decision-making are key in explaining how decisions are allocated among agents of firms.