Does Decentralized Organization Improve Individual Performance? Evidence from Journalists

In this paper, I explore a natural experiment of organizational change from decentralization to centralization in a leading Chinese newspaper. Using a di¤erences-in-di¤erences approach, I …nd that centralization substantially increases the journalists’performance in the dimension desired by the newspaper. I provide evidence that the journalists whose jobs are potentially associated with larger private bene…ts respond more to the centralization reform and the journalists whose incentives are more aligned with the newspaper’s goal respond less to the reform. The main …ndings are consistent with recent economic theories of organization that emphasize the tradeo¤s between Economics Department and Centre for Economic Performance, the London School of Economics, Houghton Street, London WC2A 2AE, UK. Email: [email protected]; Tel:+44 (0)20-79557080; Fax: +44 (0)20-79557595. I thank Oriana Bandiera, Luis Garicano and Daniel Sturm for numerous advice. For helpful comments and suggestions, I would like to thank Brian Barry, Marianne Bertrand, Robin Burgess, Alexander Lembcke, Dalia Marin, Gerard Padro I Miquel, Ignacio Palacios-Huerta, Steve Pischke, Andrea Prat, Stephen Redding, Gerard Roland, Shing-yi Wang and seminar participants at the China Summer Institute (2008) and LSE.