The architecture of attention: Group structure and subsidiary autonomy

This paper examines the relationship between strategic decision‐making at the subsidiary level and organizational structure. In many organizations, headquarters and subsidiaries are separated by intermediate subsidiaries. Building on the attention‐based view of the firm, we argue that the greater the “organizational distance” of a focal subsidiary from headquarters (measured by the number of intermediate subsidiaries separating the subsidiary from headquarters), the lower the attention that headquarters devote to the subsidiary. Thus, subsidiary autonomy from headquarters increases with organizational distance. Using a large comprehensive dataset on the structure of corporate groups in Western Europe, we provide several pieces of evidence consistent with these hypotheses. By contrast, we find little support for the view that tall pyramids are created to magnify the voting control of large shareholders.