Technology, Information and the Decentralization of the Firm

67 Pages Posted: 24 Apr 2006

See all articles by Daron Acemoglu

Daron Acemoglu

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

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Claire Lelarge

University of Paris-Saclay; Banque de France - Economic Study and Research Division; Centre for Economic Policy Research (CEPR)

John Van Reenen

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

Fabrizio Zilibotti

Centre for Economic Policy Research (CEPR); Yale University

Multiple version iconThere are 3 versions of this paper

Date Written: April 13, 2006

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.

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

JEL Classification: O31, O32, O33, F23

Suggested Citation

Acemoglu, Daron and Aghion, Philippe and Lelarge, Claire and Lelarge, Claire and Van Reenen, John Michael and Zilibotti, Fabrizio 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: https://ssrn.com/abstract=898008 or http://dx.doi.org/10.2139/ssrn.898008

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)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Claire Lelarge

University of Paris-Saclay ( email )

55 Avenue de Paris
Versailles, 78000
France

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
FRANCE

HOME PAGE: http://https://sites.google.com/site/clairelelargeeconomics/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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)

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)

London
United Kingdom

Fabrizio Zilibotti

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Yale University ( email )

493 College St
New Haven, CT CT 06520
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
282
Abstract Views
5,740
Rank
150,153
PlumX Metrics