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The distinct effects of information technology and communication technology on firm organization

Bloom, Nick and Garicano, Luis and Sadun, Raffaella and Van Reenen, John (2009) The distinct effects of information technology and communication technology on firm organization. CEP Discussion Papers, 927. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: 927

Abstract

Empirical studies on information communication technologies (ICT) typically aggregate the “information” and “communication” components together. We show theoretically and empirically that these have very different effects on the empowerment of employees, and by extension on wage inequality. If managerial hierarchies are devices to acquire and transmit knowledge and information, technologies that reduce information costs enable agents to acquire more knowledge and ‘empower’ lower level agents. Conversely, technologies reducing communication costs substitute agent’s knowledge for directions from their managers, and lead to centralization. Using an original dataset of firms in the US and seven European countries we study the impact of ICT on worker autonomy, plant manager autonomy and spans of control. Consistently with the theory we find that better information technologies (Enterprise Resource Planning for plant managers and CAD/CAM for production workers) are associated with more autonomy and a wider span of control. By contrast, communication technologies (like data networks) decrease autonomy for both workers and plant managers. Our findings are robust to using exogenous variation in cross-country telecommunication costs arising from differential regulatory regimes.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: © 2009 the authors
Subjects: Q Science > QA Mathematics > QA75 Electronic computers. Computer science
H Social Sciences > HE Transportation and Communications
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Management
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Series: Working Papers > CEP Discussion Papers
Date Deposited: 12 Oct 2009 15:43
Last Modified: 14 Nov 2012 10:19
URI: http://eprints.lse.ac.uk/id/eprint/25477

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