Technology, Information, and the Decentralization of the Firm

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Technology, Information, and the Decentralization of the Firm

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Title: Technology, Information, and the Decentralization of the Firm
Author: Zilibotti, Fabrizio; Van Reenen, John; Lelarge, Claire; Aghion, Philippe; Acemoglu, Daron

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Citation: Acemoglu, Daron, Philippe Aghion, Claire Lelarge, John Van Reenen, and Fabrizio Zilibotti. 2007. Technology, information, and the decentralization of the firm. Quarterly Journal of Economics 122, no. 4: 1759-1799.
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Abstract: This paper analyzes the relationship between the diffusion of new technologies and the decentralization 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 his 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 tradeoff 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 data sets on French and British firms in the 1990s, we report robust correlations consistent with these predictions.
Published Version: http://dx.doi.org/10.1162/qjec.2007.122.4.1759
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4481506

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  • FAS Scholarly Articles [7219]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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