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Measuring the Impact Factor of Agents within an Organization Using Communication Patterns

  • Palacios-Huerta, Ignacio
  • Prat, Andrea

Organizational economics predicts that communication patterns within an organization should reflect the relative value of their members to the organization. We propose to measure the impact factor of an agent by applying the Invariant Method–also known as Google’s PageRank algorithm–to electronic communication data. To explore the validity of this measure, we analyze email exchanges among the top executives of a large retail company. We construct their individual impact factors based only on email patterns and we compare them to standard economic measures of organizational importance. We find that: (i) The impact-factor ranking of executives mirrors perfectly their hierarchical ranking; (ii) Impact factor variability is significantly correlated with salary differences; (iii) Subsequent promotions (dismissals) affect executives with unusually high (low) impact factors. We conclude that simple communication-based impact factors may be a useful tool to measure the relative importance of agents in organizations.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8040.

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Date of creation: Oct 2010
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Handle: RePEc:cpr:ceprdp:8040
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  1. Andrea Prat, 2005. "The Wrong Kind of Transparency," American Economic Review, American Economic Association, vol. 95(3), pages 862-877, June.
  2. Wouter Dessein & Tano Santos, 2006. "Adaptive Organizations," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 956-985, October.
  3. Van Zandt, Timothy, 2001. "Information Overload in a Network of Targeted Communication," CEPR Discussion Papers 2836, C.E.P.R. Discussion Papers.
  4. Mathias Dewatripont & Patrick Bolton, 1996. "The firm as a communication network," ULB Institutional Repository 2013/9597, ULB -- Universite Libre de Bruxelles.
  5. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September.
  6. 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.
  7. Ignacio Palacios-Huerta & Oscar Volij, 2002. "The Measurement of Intellectual Influence," Economic theory and game theory 015, Oscar Volij.
  8. Van Zandt, Timothy, 1999. "Real-Time Decentralized Information Processing as a Model of Organizations with Boundedly Rational Agents," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 633-58, July.
  9. Jacques Crémer & Luis Garicano & Andrea Prat, 2007. "Language and the Theory of the Firm," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 373-407, 02.
  10. Raymond Fisman & Sheena S. Iyengar & Emir Kamenica & Itamar Simonson, 2006. "Gender Differences in Mate Selection: Evidence from a Speed Dating Experiment," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 673-697, May.
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