Working Paper: NBER ID: w12206
Authors: Daron Acemoglu; Philippe Aghion; Claire Lelarge; John Van Reenen; Fabrizio Zilibotti
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. 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 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 datasets of French and British firms in the 1990s we report robust correlations consistent with these predictions.
Keywords: Decentralization; Technology; Firm Organization; Heterogeneity
JEL Codes: O31; O32; O33; F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Heterogeneity (D29) | Uncertainty regarding optimal technology implementation (O33) |
| Distance to the frontier (F55) | Implementation challenges (O33) |
| Firms closer to the technological frontier (F12) | Decentralization (H77) |
| Firms in more heterogeneous environments (L29) | Decentralization (H77) |
| Younger firms (L26) | Decentralization (H77) |