Governance and Political Economy

Institutional Capacity as an Organizational Challenge: A Field Experiment in Pakistan

Project members:
Principal Investigator: Hamna Ahmed, Lahore School of Economics
Simon Quinn, University of Oxford 
Kate Vyborny, Duke University     

RAs:Ahsan Ansari, Pakistan Poverty Alleviation Fund (PPAF)
Salman Khalid, Pakistan Poverty Alleviation Fund (PPAF)
Saheem Khizer, United Nations Development Programme (UNDP)
Shahmir-ul-Haq, Pakistan Poverty Alleviation Fund (PPAF)
Raja Abdur Rehman, Lahore School of Economics
Yushma Umar, Pakistan Poverty Alleviation Fund (PPAF) and
Hijab Waheed, Lahore School of Economics

This research is funded by the Pakistan Poverty Alleviation Fund (PPAF), International Growth Centre (IGC) and National Science Foundation (NSF). Large organizations, such as firms or bureaucracies, are often structured as complex hierarchies. Theory suggests two features of an organizational hierarchy may matter for its performance: information flow within the hierarchy; and divergent preferences of the members of the hierarchy. However, we have limited empirical evidence on how either affects organizational capacity and performance. In this study, we shed light on these issues through a novel experiment involving a large donor organization and over 800 recipient community organizations across Pakistan. The design allows us to test how each part of a large, complex organization (the donor) responds to new information on performance (of recipient organizations) on key performance indicators, and how the responses of both donor and recipients to new information and incentives relate to organizational characteristics of theoretical importance, including divergence of preferences between members of the organization; communication costs between parts of the organization; and decentralization of decision making authority. (AEA RCT Registry)