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Technology, information, and the decentralization of the firm

Acemoglu, D.; Aghion, P.; Lelarge, C.; van Reenen, J.; Zilibotti, F.; (2007) Technology, information, and the decentralization of the firm. Quarterly Journal of Economics , 122 (4) pp. 1759-1799. 10.1162/qjec.2007.122.4.1759. Green open access

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This paper analyzes the relationship between the diffusion of new technologies and the decentralization 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 his 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 tradeoff shifts in favor 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 data sets on French and British firms in the 1990s, we report robust correlations consistent with these predictions.

Type: Article
Title: Technology, information, and the decentralization of the firm
Open access status: An open access version is available from UCL Discovery
DOI: 10.1162/qjec.2007.122.4.1759
Publisher version: http://dx.doi.org/10.1162/qjec.2007.122.4.1759
Language: English
Additional information: © 2007 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology. Please see http://eprints.ucl.ac.uk/17767/ for a working paper version
Keywords: Diffusion, firm, firms, technology, technologies
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/17721
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