February 2008

When Should a Firm Decentralize?
Ask a nanoscientist how an amazing new molecule was built and you're liable to hear, "It assembled itself." Observations of such self-organizing systems are increasingly common in the natural sciences, as complex structures and astounding properties emerge without any influence from external sources. In the corporate arena, however, a boardroom decision to let a company "assemble itself" would probably lead to panic on the trading floor. When it comes to corporate structuring, it is far more normal for the players to engage in some intelligent design, to co-opt the phrase. In this vein, Kellogg School of Management Professor Artur Raviv (Finance) and longtime collaborator Milton Harris (formerly of Kellogg, now at the University of Chicago) write in Management Science about how various features of corporations can determine the structures by which the company should be organized.

Milton Harris

Artur Raviv