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Language and the Theory of the Firm

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Author Info
Jacques Crémer
Luis Garicano
Andrea Prat

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Abstract

We characterize efficient technical languages and study their interaction with the scope and structure of organizations. Efficient languages use precise words for frequent events and vague words for unusual ones. A broader organizational scope allows for more synergies to be captured, but reduces within-unit efficiency, since it requires a more generic language. A manager working as specialized translator may also be used to achieve between-unit coordination while maintaining separate languages. Our theory reconciles two recent well-documented phenomena within organizations: the recent increase in information centralization and the reduction in hierarchical centralization. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdfplus/10.1162/qjec.122.1.373
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Publisher Info
Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 122 (2007)
Issue (Month): 1 (02)
Pages: 373-407
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Handle: RePEc:tpr:qjecon:v:122:y:2007:i:1:p:373-407

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bolton, Patrick & Dewatripont, Mathias, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 809-39, November. [Downloadable!] (restricted)
  2. Jacques Cremer, 1980. "A Partial Theory of the Optimal Organization of a Bureaucracy," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 683-693, Autumn. [Downloadable!] (restricted)
  3. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October. [Downloadable!] (restricted)
  4. Duncan Simester & Marc Knez, 2002. "Direct and Indirect Bargaining Costs and the Scope of the Firm," Journal of Business, University of Chicago Press, vol. 75(2), pages 283-304, April. [Downloadable!]
  5. Pierpaolo Battigalli & Giovanni Maggi, 2002. "Rigidity, Discretion, and the Costs of Writing Contracts," American Economic Review, American Economic Association, vol. 92(4), pages 798-817, September. [Downloadable!]
  6. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September. [Downloadable!] (restricted)
  7. Caroli, Eve & Van Reenen, John, 1999. "Skill biased organizational change? Evidence from a panel of British and French establishments," CEPREMAP Working Papers (Couverture Orange) 9917, CEPREMAP. [Downloadable!]
    Other versions:
  8. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
  9. Luis Garicano & Esteban Rossi-Hansberg, 2006. "Organization and Inequality in a Knowledge Economy," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1383-1435, November. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nicholas Bloom & Luis Garicano & Raffaella Sadun & John Van Reenen, 2009. "The distinct effects of Information Technology and Communication Technology on firm organization," NBER Working Papers 14975, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Arnaud Costinot & Lindsay Oldenski & James E. Rauch, 2009. "Adaptation and the Boundary of Multinational Firms," NBER Working Papers 14668, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Antonelli Cristiano & Patrucco Pierpaolo & Quatraro Francesco, 2008. "Pecuniary Knowledge Externalities: Evidence from European Regions," Dipartimento di Economia "S. Cognetti de Martiis" LEI & BRICK - Laboratorio di economia dell'innovazione "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo 200803, University of Turin. [Downloadable!]
  4. Michaels, Guy, 2007. "The Division of Labour, Coordination, and the Demand for Information Processing," CEPR Discussion Papers 6358, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Guy Michaels, 2007. "The Division of Labor, Coordination, and the Demand for Information Processing," CEP Discussion Papers dp0811, Centre for Economic Performance, LSE. [Downloadable!]
  6. Strauss-Kahn, Vanessa & Vives, Xavier, 2006. "Why and where do headquarters move?," IESE Research Papers D/650, IESE Business School.
    Other versions:
  7. Huang, Weiting, 2009. "作为人力资本的语言：专业化、组织沟通与语言习得
    [Language as Human Capital: Labor Specialization, Organizational Communication and Language Acquisition]    ," MPRA Paper 15677, University Library of Munich, Germany. [Downloadable!]
  8. Pier Patrucco, 2008. "The economics of collective knowledge and technological communication," The Journal of Technology Transfer, Springer, vol. 33(6), pages 579-599, December. [Downloadable!] (restricted)
  9. Dessein, Wouter & Garicano, Luis & Gertner, Robert, 2007. "Organizing for Synergies," CEPR Discussion Papers 6019, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  10. Alonso, Ricardo & Dessein, Wouter & Matouschek, Niko, 2006. "When Does Coordination Require Centralization?," CEPR Discussion Papers 5802, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Hertel, Jo & Smith, John, 2009. "Not so cheap talk: a model of advice with communication costs," MPRA Paper 17056, University Library of Munich, Germany. [Downloadable!]
  12. Degryse, H.A. & Cerqueiro, G.M. & Ongena, S., 2007. "Distance, Bank Organizational Structure and Credit," Discussion Paper 2007-018, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
  13. Isabel Maria Medalho Pereira, 2007. "Incentives for Interdisciplinary Research," UFAE and IAE Working Papers 720.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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