Abstract
The allocation of decision rights is an integral component of designing organizational architecture. Economists
have long understood the importance of co-locating decision rights with the knowledge that is valuable
to those decisions. Following this prescription, marketing scholars have developed strong theoretical
arguments in favor of delegating pricing authority to the sales force. Empirical work, however, reveals a
significant number of sales organizations yielding only minimal authority to their salespeople. Given this
divergence between theory and practice, we develop and empirically test two mitigating factors that could
potentially explain why firms restrict pricing authority. We test our hypotheses on a sample of 222 German
sales organizations and find that the data are generally consistent with our conceptualization.
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