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Dogan, Mustafa 
ORCID: https://orcid.org/0000-0001-9313-8911, Jacquillat, Alexandre and Yildirim, Pinar
(2024)
Strategic automation and decision-making authority.
Journal of Economics & Management Strategy, 33 (1).
pp. 203-246.
ISSN 1058-6407
Abstract
This paper studies how automation impacts the structure of decision-making in organizations. We develop a theoretical model of a firm, where a principal makes a decision about how much to prioritize the new product development division when the division is led by a manager who holds private information specific to this division and has misaligned preferences with the principal. The principal chooses whether to decentralize this decision by delegating it to the manager, resulting in more informed but unbiased decision. In this setting, we investigate how automation which reduces operational variability may alter this choice of organizational structure. The findings from our analysis show that firms deploy automation resources differently depending on their organizational structure: centralized firms choose to automate divisions that face more uncertainty, while decentralized firms do the opposite. Moreover, increasing access to automation results in higher centralization of decision-making in firms. In the extensions, we show that the strategic use of automation reduces the informativeness of intrafirm communication, and also, that automation can be a strategic substitute to monetary contracts.
| Item Type: | Article |
|---|---|
| Additional Information: | Funding Information: We are grateful to Miguel Villas‐Boas, Anthony Dukes, Tim Lee, Niko Matouschek, Paul Pavlou, Lowell Taylor, and Christophe Van den Bulte and the audiences at the Summer Institute for Competitive Strategy at Berkeley, The International Industrial Organization Conference, Virtual Digital Economy Seminar, 12th Paris Conference on Digital Economics for their feedback on the earlier versions of this document. We thank the Wharton Dean's Research Grant and the Mack Institute of the University of Pennsylvania for their financial support for the research. Publisher Copyright: © 2023 Wiley Periodicals LLC. |
| Faculty \ School: | Faculty of Social Sciences > School of Economics |
| UEA Research Groups: | Faculty of Social Sciences > Research Groups > Economic Theory |
| Related URLs: | |
| Depositing User: | LivePure Connector |
| Date Deposited: | 03 Dec 2024 01:35 |
| Last Modified: | 09 Dec 2024 01:38 |
| URI: | https://ueaeprints.uea.ac.uk/id/eprint/97847 |
| DOI: | 10.1111/jems.12557 |
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