We show that decision making in organizations is typically more complicated than simply choosing either to delegate or to centralize. Firms have to consider not only the level at which a decision is made (authority location) but also how many people are involved (authority diffusion), and the...

The influential empirical literature based on the job-demand-control theory finds a strong relationship between an employee’s control over their work (autonomy), the demands of the job, and negative health outcomes such as depression. Previous studies have neglected the possible endogeneity of...

A person’s lived experience, including their culture and upbringing, affects their cognition. This affects how they perceive any given situation. We use differences in cultural norms regarding individualism to explain preference heterogeneity about power. Using matched employee- establishment...

We model the determinants of who makes decisions, the principal or an agent, when there are multiple decisions. Decision making takes effort and time; and, once implemented, the expected loss from a particular decision (or project) increases with the length of time since the last decision was...

Using establishment-level count data, we investigate the relationship between employee trust of their managers and both: (i) product- market conditions; and (ii) the observability of manager’s actions within the firm. When demand is expanding (contracting), average employee trust of their...

It is not possible for a formal employment contract to detail everything an employee should do and when. Informal relationships, in particular trust, allow managers to arrange a business in a more productive way; high-trust firms are both more profitable and faster growing. For example, if they...