On the Economics of Organization

Abstract

This thesis consists of three empirical studies using novel data on organizations for analysis. Chapter 1 uses the longitudinal and nationally representative data from Statistics Canada's Workplace and Employee Survey to examine the distinct effects of Information and Communication Technology (ICT) on decentralization of decision rights. Using a sample of workplaces from different sectors and controlling for unobserved workplace-level heterogeneity, I find that decentralization (defined as the case when workers can plan work for themselves) is more likely when database software is used (which reduces learning cost) but is less likely when communication system is used (which reduces communication cost). These results are consistent with the predictions of the organizational model by Garicano (2000). Chapter 2 examines the impact of competition on the quality of the middle management, which is related to an under-studied question in industrial organization of the mechanisms through which competition can enhance productivity. Using the data from Workplace and Employee Survey, I find that increased competition leads to an improvement in managerial quality, proxied by the use of Human Resource Management (HRM) practices. These results complement the industry-specific evidence documented in the literature. Chapter 3, co-authored with Professor Varouj A. Aivazian, uses the management score of Bloom and Van Reenen (2007) as a proxy for managerial quality to study the interactions among capital structure, market structure, and firm organizational structure. We find that leverage is negatively related to both competition and managerial quality. While the negative relationship between competition and leverage may be explained by the static trade-off theory, we do not find supportive evidence. In contrast, we find that managerial quality is related to some standard capital structure determinants and that increased competition is associated with better managerial quality. Finally, we find that the negative effect of competition on leverage reduces when we control for firm managerial quality, suggesting that managerial quality can link capital structure and market structure.