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Language and the Theory of the Firm
Abstract
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.
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Citations
Cited by
Information, Technology, and Information Worker Productivity
Aral, S., Brynjolfsson, E., & Van Alstyne, M. (2012) · Information Systems Research · doi:10.1287/isre.1110.0408 · Cited by 256
Can Soft Information Survive Organizational Distance? Evidence from SMB Lending
Cerchiello, P., Filomeni, S., Tanda, A., & Toma, A. M. (2025) · European Accounting Review · doi:10.1080/09638180.2024.2447356
Can soft information survive organizational distance? Evidence from SMB lending
Cerchiello, P., Filomeni, S., & Tanda, A. (2025) · doi:10.2139/ssrn.5065824
Metadata
- Authors
- Cremer, J., Garicano, L., & Prat, A.
- Venue
- The Quarterly Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Published
- 2007-02-01
- Volume
- 122
- Issue
- 1
- Pages
- 373-407
- ISSN
- 0033-5533 (ISSN-L)
- 1531-4650
- OpenAlex
- W2079107569
- Cited by
- 265
- References
- 0
- FWCI
- 32.01
- Type
- journal article
- Language
- en
- Open access
- closed
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- Cremer, J., Garicano, L., & Prat, A. (2007). Language and the Theory of the Firm. The Quarterly Journal of Economics. https://doi.org/10.1162/qjec.122.1.373
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