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Technology, Information and the Decentralization of the Firm

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Author Info
Acemoglu, Daron
Aghion, Philippe
Lelarge, Claire
Van Reenen, John
Zilibotti, Fabrizio

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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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5678.

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Date of creation: May 2006
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Handle: RePEc:cpr:ceprdp:5678

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Related research
Keywords: decentralization heterogeneity learning the theory of the firm

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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References listed on IDEAS
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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. Jakub Kastl & David Martimort & Salvatore Piccolo, 2008. "Delegation and R&D Incentives: Theory and Evidence from Italy," CSEF Working Papers 192, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy. [Downloadable!]
  2. Garicano, Luis & Heaton, Paul, 2006. "Computing Crime: Information Technology, Police Effectiveness and the Organization of Policing," CEPR Discussion Papers 5837, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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