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Published September 1995 | public
Journal Article

Organizational Diseconomies of scale

Abstract

Private information creates a cost of operating a hierarchy, which becomes larger as the hierarchical distance between the information source and the decision maker increases. When information about a firm's capabilities is dispersed among the individuals in the firm, production is inefficient even though everyone behaves rationally. Because hierarchies need rents in order to function, a firm with a long hierarchy may not be viable in a competitive industry.

Additional Information

© 1995 Wiley.

Additional details

Created:
August 20, 2023
Modified:
October 17, 2023