Working Paper: CEPR ID: DP9762
Authors: Nicholas Bloom; Luis Garicano; Raffaella Sadun; John Van Reenen
Abstract: Guided by theories of management by exception, we study the impact of Information and Communication Technology on worker and plant manager autonomy and span of control. The theory suggests that information technology is a decentralizing force, whereas communication technology is a centralizing force. Using a new dataset of American and European manufacturing firms, we find indeed 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, while technologies that improve communication (like data intranets) decrease autonomy for workers and plant managers. Using instrumental variables (distance from ERP's birthplace and heterogeneous telecommunication costs arising from regulation) strengthens our results.
Keywords: communication technology; delegation; information technology; organization; theory of the firm
JEL Codes: F23; O31; O32; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improvements in information technologies (L86) | Increased autonomy for plant managers (L23) |
| Improvements in information technologies (L86) | Wider span of control for plant managers (L23) |
| Access to better information (D83) | Reduced cognitive burden on managers (M54) |
| Access to better information (D83) | More decisions made by managers without corporate headquarters' authorization (G34) |
| Introduction of CAD/CAM technologies (L63) | Increased worker autonomy (J29) |
| Increased worker autonomy (J29) | Larger number of workers overseen by plant managers (L23) |
| Presence of intranets (D85) | Centralization of decision-making (D70) |
| Presence of intranets (D85) | Reduction of autonomy for workers and managers (M54) |
| Information technology (IT) (M15) | Decentralization of decision-making (H77) |
| Communication technology (CT) (L96) | Centralization of decision-making (D70) |