Business environment, managerial strategies, and the allocation of decision-making authorities in Swiss Firms

The allocation of decision-making authorities may be seen as the last link in a causal relationship starting from changes in environment and continuing to business strategy. Changes in task complexity, which can be measured by the introduction of a diversification or an outsourcing strategy, are expected to result in a shift towards a more centralized or decentralized allocation of decision-making authorities. Using nationally representative Swiss firm data, OLS, Propensity Score Matching as well as a combined matching and difference-in-differences approach in order to account for endogeneity and unobserved heterogeneity are applied. Estimates using all three approaches show a highly significant positive impact of outsourcing on a decentralized decision rights assignment, whereas a diversification strategy yields no influence. The conclusion therefore is that a lower delegation risk due to a decline in complexity results in decentralized decision-making authorities in Swiss firms.