Decentralization and Business Performance

doi:10.1017/9781108615594.007

7 - Decentralization and Business Performance

Published online by Cambridge University Press: 18 February 2019

Edmund Malesky

Edited by

Jonathan A. Rodden and

Erik Wibbels

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Jonathan A. Rodden: Affiliation:
Stanford University, California
Erik Wibbels: Affiliation:
Duke University, North Carolina

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Summary

Decisions by individual businesses are critical to the four core theoretical benefits of decentralization: tailoring, monitoring, competition, and accountability. If decentralization is working effectively, we should see evidence of it in the innovation, expansion, and productivity of firms in a given locality; and we should observe more mobile businesses exploiting differences between regions in their location decisions. Despite the clear theoretical role for business performance in the literature, the empirical evidence linking decentralization to business outcomes is thin. In this chapter, I connect the macroeconomic work on decentralization and economic performance with the literature on subnational business performance. I first lay out the major factors that affect business performance, organizing them by when subnational leaders can alter them and businesses can experience them. Next, I delineate the assumptions regarding business activity that underpin the theoretical arguments in favor of decentralization. I conclude by drawing policy implications for developmental interventions, showing when decentralization will stimulate business activity and when it may prove injurious.

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Type: Chapter
Information: Decentralized Governance and Accountability
Academic Research and the Future of Donor Programming
, pp. 144 - 177

DOI: https://doi.org/10.1017/9781108615594.007 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2019

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Accessibility Information

Accessibility compliance for the HTML of this chapter is currently unknown and may be updated in the future.