Abstract

http://ssrn.com/abstract=898008
 
 

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Technology, Information and the Decentralization of the Firm


Daron Acemoglu


Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Philippe Aghion


Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Claire Lelarge


National Institute of Statistics and Economic Studies (INSEE) - Laboratory of Microeconometrics

John Van Reenen


London School of Economics - Centre for Economic Performance (CEP); Stanford Graduate School of Business; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Fabrizio Zilibotti


University of Zurich; Centre for Economic Policy Research (CEPR)

April 13, 2006

MIT Department of Economics Working Paper No. 06-08

Abstract:     
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.

Number of Pages in PDF File: 67

Keywords: decentralization, heterogeneity, learning, the theory of the firm

JEL Classification: O31, O32, O33, F23

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Date posted: April 24, 2006  

Suggested Citation

Acemoglu, Daron and Aghion, Philippe and Lelarge, Claire and Van Reenen, John and Zilibotti, Fabrizio, Technology, Information and the Decentralization of the Firm (April 13, 2006). MIT Department of Economics Working Paper No. 06-08. Available at SSRN: http://ssrn.com/abstract=898008 or http://dx.doi.org/10.2139/ssrn.898008

Contact Information

Daron Acemoglu (Contact Author)
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
Room E52-380b
Cambridge, MA 02142
United States
617-253-1927 (Phone)
617-253-1330 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Philippe Aghion
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-495-6675 (Phone)
617-495-7730 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Claire Lelarge
National Institute of Statistics and Economic Studies (INSEE) - Laboratory of Microeconometrics ( email )
15, Boulevard Gabriel Peri
F-92245 Malakoff Cedex
France
John Michael Van Reenen
London School of Economics - Centre for Economic Performance (CEP) ( email )
Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6976 (Phone)
+44 20 7955 6848 (Fax)
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States

Institute for Fiscal Studies (IFS) ( email )
7 Ridgmount Street
London, WC1E 7AE
United Kingdom
+44 20 7240 6740 (Phone)
+44 20 7240 6136 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Fabrizio Zilibotti
University of Zurich ( email )
Rämistrasse 71
Zürich, CH-8006
Switzerland
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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References:  48
Citations:  52

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