We study the impact of information and communication technology on growth through its impact on organization and innovation. Agents accumulate knowledge through two activities: innovation (discovering new technologies) and exploitation (learning how to use the current technology). Exploitation requires the development of organizations to coordinate the work of experts, which takes time. The costs and benefits of such organizations depend on the cost of communicating and acquiring information. We find that while advances in information technology that lower information acquisition costs always increase growth, improvements in communication technology may lead to lower growth and even to stagnation, as the payoff to exploiting innovations through organizations increases relative to the payoff of new radical innovations.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
13705.
Length: Date of creation: Dec 2007 Date of revision: Handle: RePEc:nbr:nberwo:13705
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Find related papers by JEL classification: D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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