Rational Inattention and Organizational Focus
We examine the allocation of scarce attention in team production. Each team member is in charge of a specialized task, which must be adapted to a privately observed shock and coordinated with other tasks. Coordination requires that agents pay attention to each other, but attention is in limited supply. We show that when attention is scarce, organizational focus and leadership naturally arise as a response to organizational trade-offs between coordination and adaptation. At the optimum, all attention is evenly allocated to a select number of "leaders." The organization then excels in a small number of focal tasks at the expense of all others. Our results shed light on the importance of leadership, strategy and “core competences,” as well as new trends in organization design. We also derive implications for the optimal size or “scope” of organizations. Surprisingly, improvements in communication technology may result in smaller but more adaptive organizations.
|Date of creation:||Mar 2013|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
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.:
- Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
- Maria Guadalupe & Hongyi Li & Julie Wulf, 2012.
"Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management,"
NBER Working Papers
17846, National Bureau of Economic Research, Inc.
- Guadalupe, Maria & Li, Hongyi & Wulf, Julie M., 2012. "Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management," IZA Discussion Papers 6635, Institute for the Study of Labor (IZA).
- 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.
- Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1776. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:9395. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.