Organizational Diseconomies of scale

Randolph McAfee and John McMillan

Journal of Economics & Management Strategy, 1995, vol. 4, issue 3, 399-426

Abstract: Private information creates a cost of operating a hierarchy, which becomes larger as the hierarchical distance between the information source and the decision maker increases. When information about a firm's capabilities is dispersed among the individuals in the firm, production is inefficient even though everyone behaves rationally. Because hierarchies need rents in order to function, a firm with a long hierarchy may not be viable in a competitive industry.

Date: 1995
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https://doi.org/10.1111/j.1430-9134.1995.00399.x

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Working Paper: Organizational Diseconomies of Scale (1990)
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