We characterize efficient technical languages and study their interaction with the scope and structure of organizations. Efficient languages use precise words for frequent events and vague words for unusual ones. A broader organizational scope allows for more synergies to be captured, but reduces within-unit efficiency, since it requires a more generic language. A manager working as specialized translator may also be used to achieve between-unit coordination while maintaining separate languages. Our theory reconciles two recent well-documented phenomena within organizations: the recent increase in information centralization and the reduction in hierarchical centralization. © 2007 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
CITATION STYLE
Crémer, J., Garicano, L., & Prat, A. (2007). Language and the theory of the firm. Quarterly Journal of Economics, 122(1), 373–407. https://doi.org/10.1162/qjec.122.1.373
Mendeley helps you to discover research relevant for your work.