Technology, information and the decentralization of the firm
By: Daron Acemoglu ... [et al.].
Contributors: Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 06-08; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 06-08.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2006
Place of publication: Cambridge, MA
Language: eng
Number of pages: 53
Description: This paper develops a framework to analyze the relationship between the diffusion of new technologies and the decentralization decisions of firms. Centralized control relies on the information of the principal, which we equate with publicly available information. Decentralized control, on the other hand, delegates authority to a manager with superior information. However, the manager can use her informational advantage to make choices that are not in the best interest of the principal. As the available public information about the specific technology increases, the trade-off shifts in favor of centralization. We show that firms closer to the technological frontier, firms in more heterogeneous environments and younger firms are more likely to choose decentralization. Using three datasets of French and British firms in the 1990s, we report robust correlations consistent with these predictions. Keywords: decentralization, heterogeneity, learning, the theory of the firm. JEL Classifications: O31, O32, O33, F23.
Notes: Authors of this technical report: Daron Acemoglu, Philippe Aghion, Claire Lelarge, John van Reenen and Fabrizio Zilibotti.

"April 13, 2006."

Includes bibliographical references (p. 41-43).

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.