The paper analyses the differences between firms with centralized model of decision-making and firms with decentralized model of decision-making, and studies the factors that affect choice of the decision-making model at the firm. The empirical analysis is based on the large survey ‘European Firms in a Global Economy’ conducted in 2010 in 7 European countries: Germany, United Kingdom, France, Austria, Spain, Italy and Hungary.

It is shown that decentralized firms demonstrate better performance in a spectrum of different areas: they are more involved in the international trade (in particular, in the more complicated forms of international trade), innovative activities, R&D, training of employees. It is also shown that probability of centralization of firm management is significantly influenced by factors related to the distribution of property, as well as by individual characteristics of the CEO. In particular, concentration of property in the hands of individuals or families, belonging of the CEO to the family that controls the firm lead to a considerable increase in the probability of centralization. These results can reflect influence of personal (behavioral) motives of the firm owners or top managers on the choice of the governance model at the firm.

The results hold not only at the whole sample of the survey, but also for each of the countries in the sample. The influence of the features of property distribution and individual characteristics of the CEO on the probability of governance centralization at the firm is strong. For example, according to the predictions of proposed in the paper simple regression model, for the firms where CEO is an individual who controls the firm or a member of the family that controls it, probability of centralization of governance is on average 15 percentage points hig­her. In Austria, where the described effect is most prominent – 38 percentage points higher.