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Technology, information and the decentralization of the firm

Acemoglu, Daron, Aghion, Philippe, Lelarge, Claire, Van Reenen, John and Zilibotti, Fabrizio (2006) Technology, information and the decentralization of the firm. 722. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

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

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: Copyright © D. Acemoglu, P. Aghion, C. Lelarge, J. Van Reenen and F. Zilibotti.
Library of Congress subject classification: T Technology > T Technology (General)
H Social Sciences > H Social Sciences (General)
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O33 - Technological Change: Choices and Consequences; Diffusion Processes
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O32 - Management of Technological Innovation and R&D
F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 722
Date Deposited: 16 May 2006
URL: http://eprints.lse.ac.uk/778/

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