On the Theory of Divisional Structures: Some Aspects of Centralization and Decentralization of Control and Decision Making

The organization structure of the firm has been the subject of diverse research approaches. The purpose of this paper is to provide a framework for integrating the various views and analyzing the various factors that affect centralization and decentralization. After a historical review of some milestonee in organization research, a definition of decentralization which is based on the overall objectives of the firm is provided. The notions of hierarchical and mutual interaction structures are examined and contrasted with the notion of decentralization. Finally, the determinants of divisionalization are analyzed, and the suggestion is made that a study of the covariance matrix of subunit performance will guide us to the areas that need attention for possible reorganization.