Organizing Growth

50 Pages Posted: 31 Dec 2007 Last revised: 1 Mar 2015

See all articles by Luis Garicano

Luis Garicano

IE Business School; Centre for Economic Policy Research (CEPR)

Esteban Rossi-Hansberg

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 2007

Abstract

We study the impact of information and communication technology on growth through its impact on organization and innovation. Agents accumulate knowledge through two activities: innovation (discovering new technologies) and exploitation (learning how to use the current technology). Exploitation requires the development of organizations to coordinate the work of experts, which takes time. The costs and benefits of such organizations depend on the cost of communicating and acquiring information. We find that while advances in information technology that lower information acquisition costs always increase growth, improvements in communication technology may lead to lower growth and even to stagnation, as the payoff to exploiting innovations through organizations increases relative to the payoff of new radical innovations.

Suggested Citation

Garicano, Luis and Rossi-Hansberg, Esteban Alejandro, Organizing Growth (December 2007). NBER Working Paper No. w13705. Available at SSRN: https://ssrn.com/abstract=1079302

Luis Garicano (Contact Author)

IE Business School ( email )

Calle MarĂ­a de Molina, 11
Madrid, 28006
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Esteban Alejandro Rossi-Hansberg

Princeton University - Department of Economics ( email )

Princeton, NJ
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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