Organizational Form Outside the Principal–agent Paradigm

In: Bulletin of economic research, Band 50, Heft 3, S. 201-227

Abstract

This paper provides a review of theories of hierarchies in organizations where the rationale for hierarchical organization derives from agents' limited capacities for acquiring and communicating information. In these circumstances, hierarchical organization of agents may serve to reduce the amount of time necessary for completion of production tasks, or to improve the quality of information for decision‐making on how to undertake production tasks. An informal discussion of theories of hierarchy is provided as well as a formal presentation of key models and results. Limitations of existing approaches are considered.