Technology, Informationand the Decentralization of the Firm

Daron Acemoglu, Philippe Aghion, Claire Lelarge, John van Reenen () and Fabrizio Zilibotti ()

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper develops a framework to analyze the relationship between the diffusion of newtechnologies and the decentralization decisions of firms. Centralized control relies on theinformation of the principal, which we equate with publicly available information.Decentralized control, on the other hand, delegates authority to a manager with superiorinformation. However, the manager can use her informational advantage to make choices thatare not in the best interest of the principal. As the available public information about thespecific technology increases, the trade-off shifts in favour of centralization. We show thatfirms closer to the technological frontier, firms in more heterogeneous environments andyounger firms are more likely to choose decentralization. Using three datasets of French andBritish firms in the 1990s, we report robust correlations consistent with these predictions.

Keywords: Decentralization; heterogeneity; learning; the theory of the firm (search for similar items in EconPapers)
JEL-codes: O31 O32 O33 F23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cse, nep-dev and nep-ino
Date: Written 2006-05
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Downloads: (external link)
http://cep.lse.ac.uk/pubs/download/dp0722.pdf (application/pdf)

Related works:
Working Paper: Technology, Information and the Decentralization of the Firm (2006)
Working Paper: Technology, Information and the Decentralization of the Firm (2006)
Journal Article: Technology, Information, and the Decentralization of the Firm (2007)
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