We explore the relationship between the volatility of a firm's local environment and its organizational structure. Using micro-level data on a large retailer, we empirically test and provide support for our hypothesis that a more volatile local environment results in more decentralization only...

We examine the relationship between the organization of a firm and its ability to adapt to changes in the environment. We show that even if lower-level managers have superior information about their local conditions, and incentive conflicts are negligible, a centralized organization can be...