An incomplete contracts theory of information, technology and organization
Although there is good reason to expect that the growth of information work and information technology will significantly affect the trade-offs inherent in different structures for organizing work, the theoretical basis for these changes remains poorly understood. This paper seeks to address this gap by analyzing the incentive effects of different ownership arrangement in the spirit of the Grossman-Hart-Moore (GHM) incomplete contracts theory of the firm. A key departure from earlier approaches is the inclusion of a role for an "information asset", analogous to the GHM treatment of property. This approach highlights the organizational significance of information ownership and information technology. For instance, using this framework, one can determine when 1) informed workers are more likely to be owners than employees of firms, 2) increased flexibility of assets will facilitate decentralization, and 3) the need for centralized coordination will lead to centralized ownership. The framework developed sheds light on some of the empirical findings regarding the relationship between information technology and firm size and clarifies the relationship between coordination mechanisms and the optimal distribution of asset ownership. While many implications are still unexplored and untested, building on the incomplete contracts approach appears to be a promising avenue for the careful, methodical analysis of human organizations and the impact of new technologies.
(This abstract was borrowed from another version of this item.)
|Date of creation:||1991|
|Contact details of provider:|| Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA|
Web page: http://mitsloan.mit.edu/
More information through EDIRC
|Order Information:|| Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA|
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.:
- Alchian, Armen A & Demsetz, Harold, 1972.
"Production , Information Costs, and Economic Organization,"
American Economic Review,
American Economic Association, vol. 62(5), pages 777-795, December.
- Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
- Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
- Rosen, Sherwin, 1988. "Transactions Costs and Internal Labor Markets," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(1), pages 49-64, Spring.
- Sherwin Rosen, 1987. "Transactions Costs and Internal Labor Markets," NBER Working Papers 2407, National Bureau of Economic Research, Inc.
- Erik Brynjolfsson & Thomas W. Malone & Vijay Gurbaxani & Ajit Kambil, 1994. "Does Information Technology Lead to Smaller Firms?," Management Science, INFORMS, vol. 40(12), pages 1628-1644, December.
- Erik J. Brynjolfsson & Thomas Malone & Vijay Gurbaxani & Ajit Kambil, 1991. "Does Information Technology Lead to Smaller Firms?," Working Paper Series 123, MIT Center for Coordination Science.
- Brynjolfsson, Erik., 1993. "Information technology and the 'new managerial work'," Working papers 3563-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Winter, Sidney G, 1988. "On Coase, Competence, and the Corporation," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(1), pages 163-180, Spring.
- Holmström, Bengt, 1989. "Agency Costs and Innovation," Working Paper Series 214, Research Institute of Industrial Economics.
- George J. Mailath & Andrew Postlewaite, 1990. "Workers Versus Firms: Bargaining Over a Firm's Value," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 369-380. Full references (including those not matched with items on IDEAS)