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CEP discussion paper
The Distinct Effects of Information Technology and Communication Technology on Firm Organization
Nicholas Bloom, Luis Garicano, Raffaella Sadun and John Van Reenen May 2009
Paper No' CEPDP0927:
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JEL Classification: O31; O32; O33; F23

Tags: organization; delegation; information technology; communication technology; the theory of the firm

Guided by theories of management by exception, we study the impact of Information and Communication Technology on worker and plant manager autonomy and on span of control. We find, using an original dataset of American and European manufacturing firms, 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, consistently with the theory. Using instrumental variables (distance from ERP’s birthplace and heterogeneous telecommunication costs arising from regulation) strengthens our results.