Rational inattention and organizational focus
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0002-8282; 1944-7981
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American economic review, 2016, Vol. 106, No. 6, pp. 1522-1536
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DESSEIN, Wouter, GALEOTTI, Andrea, SANTOS, Tano, Rational inattention and organizational focus, American economic review, 2016, Vol. 106, No. 6, pp. 1522-1536 - https://hdl.handle.net/1814/61484
Abstract
This paper studies optimal communication flows in organizations. A production process can be coordinated ex ante, by letting agents stick to a prespecified plan of action. Alternatively, agents may adapt to task-specific shocks, in which case tasks must be coordinated ex post, using communication. When attention is scarce, an optimal organization coordinates only a few tasks ex post. Those tasks are higher performing, more adaptive to the environment, and influential. Hence, scarce attention requires setting priorities, not just local optimization. Our results provide microfoundations for a central idea in the management literature that firms should focus on a limited set of core competencies.
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European Commission, 283454
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European Research Council through ERC-starting grant [283454]
Leverhulme Trust through the Philip Leverhulme Prize
Leverhulme Trust through the Philip Leverhulme Prize