Information Production and Capital Allocation: Decentralized vs. Hierarchical Firms

摘要: This paper assesses different organizational forms in terms of their ability to generate information about investment projects and allocate capital these efficiently. A decentralized approach with small, single-manager firms is most likely be attractive when individual soft' cannot credibly transmitted. Moreover, holding fixed firm size, soft also favors flatter organizations fewer layers management. In contrast, large hierarchical multiple management are at a comparative advantage can costlessly hardened' passed along within the hierarchy. As concrete application theory, discusses consequences consolidation banking industry. It has been documented that banks acquire small banks, there pronounced decline lending businesses. To extent small-business relies heavily on information, this exactly what theory would lead one expect.