Some Stylized Facts on Organization and Its Evolution

Abstract

There is a striking difference between the large number of theoretical papers on firm organization and the lack of quantitative empirical evidence. If on the one side economists are increasingly concerned with organization of firms, on the other side organization still remains an ambiguous concept, hardly analyzed empirically. In this paper, we develop a new empirical methodology based upon business history and previous theoretical works which allows us to describe (some aspects of) the organization of firms in quantitative terms. This approach is instrumental to analyzing the hierarchical structure and the allocation of decision-making activities in a sample composed of 438 Italian metalworking plants. We also study the dynamics of firm organization in the period 1975-1997. The results of the analysis show that the (static) choice of the organizational form crucially relies upon the 'loss of control phenomenon'. They also illustrate that the dynamics of hierarchical structure follows an inertial process, characterized by incremental adjustments. Lastly, both the organization of firms and, more interestingly, its evolution differ from one category of firms to another depending crucially on firm size.

Keywords: Firm's organizational structure, Hierarchy, Decision-making allocation

JEL Classification: D23, L22