Context and Aggregation: An Experimental Study of Bias and Discrimination in Organizational Decisions

This paper addresses a notable gap at the intersection of organizational econom-ics and organization science: how does organizational context influence aggregation of in-dividual behavior in organizational decisions? Using basic centralized versus decentralizedorganizationalstructuresasbuildingblocksforourexperimentaldesign,weexaminewhether assignment of organizational positions, incentive schemes, and structural configu-ration induce endogenous adaptation in the form of change in reservation levels (bias) ormodified discrimination capability in subjects’behavior. We found that evaluators adaptedtheir reservation and discrimination levels in centralized structures, whereas they didnotgenerally adapt their reservation and discrimination levels when placed in decentralizedstructures. We identify mechanisms that explain thesefindings; explain how they influenceaggregate, organizational behavior; and discuss implications for research and practice