Working Paper: CEPR ID: DP4205
Authors: Jacques Crmer; Luis Garicano; Andrea Prat
Abstract: A code is a technical language that members of an organization learn in order to communicate among themselves and with members of other organizations. What are the features of an optimal code and how does it interact with the characteristics of the organization? This Paper develops a simple communication model and characterizes optimal codes. There exists a fundamental trade-off between choosing a specialized code that simplifies internal communication and a common code that facilitates external communication. We identify the drivers of this trade-off and we study the strategic aspects of code adoption. The results are used to interpret some existing organizational structures.
Keywords: coding; communication; cost; organization theory
JEL Codes: D23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| specialized codes (Z00) | internal communication efficiency (L96) |
| common codes (Y90) | external communication efficiency (O36) |
| code commonality (C10) | coordination efficiency (D61) |
| first mover advantage in code adoption (L17) | inter-organizational collaboration (O36) |
| code choice (C88) | organizational structures (L22) |