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Technology, Information and the Decentralization of the Firm

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

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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. 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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12206.

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Date of creation: May 2006
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Handle: RePEc:nbr:nberwo:12206

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Find related papers by JEL classification:
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
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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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. Jakub Kastl & David Martimort & Salvatore Piccolo, 2008. "Delegation and R&D Spending: Evidence from Italy," CSEF Working Papers 192, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 17 Oct 2009. [Downloadable!]
  3. 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)
  4. Kieron Meagher & Andrew Wait, 2008. "Who Decides about Change and Restructuring in Organizations?," CEPR Discussion Papers 587, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
  5. Taylor, Mark Zachary, 2007. "Political decentralization and technological innovation: testing the innovative advantages of decentralized states," MPRA Paper 10996, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  6. Luis Garicano & Paul Heaton, 2007. "Information Technology, Organization, and Productivity in the Public Sector: Evidence from Police Departments," CEP Discussion Papers dp0826, Centre for Economic Performance, LSE. [Downloadable!]
  7. Nick Bloom & Raffaella Sadun & John Van Reenen, 2009. "The Organization of Firms Across Countries," CEP Discussion Papers dp0937, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
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