Codes in Organizations

36 Pages Posted: 9 Feb 2004

See all articles by Jacques Cremer

Jacques Cremer

Toulouse School of Economics

Luis Garicano

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

Andrea Prat

Columbia Business School - Finance and Economics; Centre for Economic Policy Research (CEPR)

Date Written: January 2004

Abstract

A code is a technical language that members of an organization learn in order to communicate among themselves and with members of other organizations. What are the features of an optimal code and how does it interact with the characteristics of the organization? This Paper develops a simple communication model and characterizes optimal codes. There exists a fundamental trade-off between choosing a specialized code that simplifies internal communication and a common code that facilitates external communication. We identify the drivers of this trade-off and we study the strategic aspects of code adoption. The results are used to interpret some existing organizational structures.

Keywords: Coding, organization theory, communication cost

JEL Classification: D23

Suggested Citation

Cremer, Jacques and Garicano, Luis and Prat, Andrea, Codes in Organizations (January 2004). CEPR Discussion Paper No. 4205. Available at SSRN: https://ssrn.com/abstract=500913

Jacques Cremer

Toulouse School of Economics ( email )

1 Esplanade de l'Université
Toulouse Cedex 06, 31080
France

Luis Garicano (Contact Author)

IE Business School ( email )

Calle María de Molina, 11
Madrid, 28006
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Andrea Prat

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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