TY - JOUR AU - Bloom,Nicholas AU - Garicano,Luis AU - Sadun,Raffaella AU - Reenen,John Van TI - The distinct effects of Information Technology and Communication Technology on firm organization JF - National Bureau of Economic Research Working Paper Series VL - No. 14975 PY - 2009 Y2 - May 2009 UR - http://www.nber.org/papers/w14975 L1 - http://www.nber.org/papers/w14975.pdf N1 - Author contact info: Nicholas Bloom Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/725-3266 Fax: 650/725-5702 E-Mail: nbloom@stanford.edu Luis Garicano Departments of Management and Economics and Centre for Economic Performance London School of Economics Houghton Street London WC2A 2AE United Kingdom E-Mail: garicano@lse.ac.uk Raffaella Sadun Harvard Business School Morgan Hall 233 Soldiers Field Boston, MA 02163 Tel: 617/495-6190 Fax: 617/495-0355 E-Mail: rsadun@hbs.edu John Van Reenen Department of Economics London School of Economics Centre for Economic Performance Houghton Street London WC2A 2AE UNITED KINGDOM Tel: 00 44 207/955-6976 Fax: 00 44 207/955-6848 E-Mail: j.vanreenen@lse.ac.uk AB - Empirical studies on information communication technologies (ICT) typically aggregate the "information" and "communication" components together. We show theoretically and empirically that these have very different effects on the empowerment of employees, and by extension on wage inequality. If managerial hierarchies are devices to acquire and transmit knowledge and information, technologies that reduce information costs enable agents to acquire more knowledge and 'empower' lower level agents. Conversely, technologies reducing communication costs substitute agent's knowledge for directions from their managers, and lead to centralization. Using an original dataset of firms in the US and seven European countries we study the impact of ICT on worker autonomy, plant manager autonomy and spans of control. Consistently with the theory we find that better information technologies (Enterprise Resource Planning for plant managers and CAD/CAM for production workers) are associated with more autonomy and a wider span of control. By contrast, communication technologies (like data networks) decrease autonomy for both workers and plant managers. Our findings are robust to using exogenous variation in cross-country telecommunication costs arising from differential regulatory regimes. ER -