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Centralization vs. Decentralization in a Multi-Unit Organization: A Computational Model of a Retail Chain as a Multi-Agent Adaptive System

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  • Myong-Hun Chang

    (Department of Economics, Cleveland State University, Cleveland, Ohio 44115)

  • Joseph E. Harrington

    (Department of Economics, The Johns Hopkins University, Baltimore, Maryland 21218)

Abstract

A computational model of a retail chain is developed in which store managers continually search for better practices. Search takes place over a rugged landscape defined over the space of store practices. The main objective of this research is to determine how the amount of discretion given to store managers as to how they run their stores influences the rate of innovation at the store level. We find that greater decentralization enhances firm performance when stores' markets are sufficiently different, the horizon is sufficiently long, and markets are sufficiently stable.

Suggested Citation

  • Myong-Hun Chang & Joseph E. Harrington, 2000. "Centralization vs. Decentralization in a Multi-Unit Organization: A Computational Model of a Retail Chain as a Multi-Agent Adaptive System," Management Science, INFORMS, vol. 46(11), pages 1427-1440, November.
    • Handle: RePEc:inm:ormnsc:v:46:y:2000:i:11:p:1427-1440
    DOI: 10.1287/mnsc.46.11.1427.12085
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    References listed on IDEAS

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