The Distinct Effects of Information Technology and Communication Technology on Firm Organization

57 Pages Posted: 25 Nov 2013

See all articles by Nicholas Bloom

Nicholas Bloom

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

Luis Garicano

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

Raffaella Sadun

Harvard University - Strategy Unit; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2013

Abstract

Guided by theories of management by exception, we study the impact of Information and Communication Technology on worker and plant manager autonomy and span of control. The theory suggests that information technology is a decentralizing force, whereas communication technology is a centralizing force. Using a new dataset of American and European manufacturing firms, we find indeed that better information technologies (Enterprise Resource Planning for plant managers and CAD/CAM for production workers) are associated with more autonomy and a wider span, while technologies that improve communication (like data intranets) decrease autonomy for workers and plant managers. Using instrumental variables (distance from ERP's birthplace and heterogeneous telecommunication costs arising from regulation) strengthens our results.

Keywords: communication technology, delegation, information technology, organization, theory of the firm

JEL Classification: F23, O31, O32, O33

Suggested Citation

Bloom, Nicholas and Garicano, Luis and Sadun, Raffaella and Van Reenen, John Michael, The Distinct Effects of Information Technology and Communication Technology on Firm Organization (November 2013). CEPR Discussion Paper No. DP9762. Available at SSRN: https://ssrn.com/abstract=2359541

Nicholas Bloom (Contact Author)

Stanford University - Department of Economics ( email )

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HOME PAGE: http://economics.stanford.edu/faculty/bloom

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Luis Garicano

IE Business School ( email )

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Centre for Economic Policy Research (CEPR)

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Raffaella Sadun

Harvard University - Strategy Unit ( email )

Harvard Business School
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National Bureau of Economic Research (NBER) ( email )

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John Michael Van Reenen

London School of Economics - Centre for Economic Performance (CEP) ( email )

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