Large companies are usually organized into business units, yet some activities are almost always centralized in a company-wide functional unit. We first show that organizations endogenously create an incentive conflict between functional managers (who desire excessive standardization) and...

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...