IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2210.14861.html
   My bibliography  Save this paper

The Information Bottleneck Principle in Corporate Hierarchies

Author

Listed:
  • Cameron Gordon

Abstract

The hierarchical nature of corporate information processing is a topic of great interest in economic and management literature. Firms are characterised by a need to make complex decisions, often aggregating partial and uncertain information, which greatly exceeds the attention capacity of constituent individuals. However, the efficient transmission of these signals is still not fully understood. Recently, the information bottleneck principle has emerged as a powerful tool for understanding the transmission of relevant information through intermediate levels in a hierarchical structure. In this paper we note that the information bottleneck principle may similarly be applied directly to corporate hierarchies. In doing so we provide a bridge between organisation theory and that of rapidly expanding work in deep neural networks (DNNs), including the use of skip connections as a means of more efficient transmission of information in hierarchical organisations.

Suggested Citation

  • Cameron Gordon, 2022. "The Information Bottleneck Principle in Corporate Hierarchies," Papers 2210.14861, arXiv.org.
  • Handle: RePEc:arx:papers:2210.14861
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2210.14861
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Markey-Towler, Brendan, 2019. "Rules, perception and emotion: When do institutions determine behaviour?," Journal of Institutional Economics, Cambridge University Press, vol. 15(3), pages 381-396, June.
    2. Richard M. Cyert & Herbert A. Simon & Donald B. Trow, 1956. "Observation of a Business Decision," The Journal of Business, University of Chicago Press, vol. 29, pages 237-237.
    3. Williamson, Oliver E, 1973. "Markets and Hierarchies: Some Elementary Considerations," American Economic Review, American Economic Association, vol. 63(2), pages 316-325, May.
    4. H. B. Malmgren, 1961. "Information, Expectations and the Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(3), pages 399-421.
    5. Wouter Dessein & Richard Holden, 2022. "Organizations with Power-Hungry Agents," Journal of Law and Economics, University of Chicago Press, vol. 65(S1), pages 263-291.
    6. Brendan Markey-Towler, 2017. "I, Roboticus Oeconomicus The philosophy of mind in economics, and why it matters," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 41(1), pages 203-237.
    7. Helbing, Dirk & Ammoser, Hendrik & Kühnert, Christian, 2006. "Information flows in hierarchical networks and the capability of organizations to successfully respond to failures, crises, and disasters," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 363(1), pages 141-150.
    8. Ida Momennejad & Ajua Duker & Alin Coman, 2019. "Bridge ties bind collective memories," Nature Communications, Nature, vol. 10(1), pages 1-8, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simshauser, Paul & Tian, Yuan & Whish-Wilson, Patrick, 2015. "Vertical integration in energy-only electricity markets," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 35-56.
    2. Foss Kirsten & Foss Nicolai & Klein Peter G. & Klein Sandra K., 2002. "Heterogeneous Capital, Entrepreneurship, and Economic Organization," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 12(1), pages 1-20, March.
    3. Kafigi Jeje, 2020. "Risk-Taking and Performance of Small and Medium-Sized Enterprises: Lessons from Tanzanian Bakeries," Journal of Economics and Behavioral Studies, AMH International, vol. 12(3), pages 1-22.
    4. M. Meuleman & S. Manigart & A. Lockett & M. Wright, 2006. "Transaction costs, behavioral uncertainty and the formation of interfirm cooperations: Syndication in the UK private equity market," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/359, Ghent University, Faculty of Economics and Business Administration.
    5. Ichiishi, Tatsuro, 1985. "Management versus ownership, II," European Economic Review, Elsevier, vol. 27(2), pages 115-138, March.
    6. Mr Clive Boddy & Mr Derek Bond & Dr Elaine Ramsey, 2010. "Projective Techniques Are they a Victim of Clashing Paradigms," Accounting, Finance and Economics Research Group Working Papers 1, Ulster Business School.
    7. Lydia Bals & Jon F. Kirchoff & Kai Foerstl, 2016. "Exploring the reshoring and insourcing decision making process: toward an agenda for future research," Operations Management Research, Springer, vol. 9(3), pages 102-116, December.
    8. Allen, Darcy W.E. & Berg, Chris & Markey-Towler, Brendan & Novak, Mikayla & Potts, Jason, 2020. "Blockchain and the evolution of institutional technologies: Implications for innovation policy," Research Policy, Elsevier, vol. 49(1).
    9. Ewelina Nojszewska, 2011. "Economic effectiveness as an analytical tool for health care (Efektywnosc ekonomiczna jako narzedzie analityczne dla ochrony zdrowia)," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 9(33), pages 11-26.
    10. Derya Fındık & Aysıt Tansel, 2013. "Intangible investment and Technical efficiency: The case of software-intensive manufacturing firms in Turkey," EY International Congress on Economics I (EYC2013), October 24-25, 2013, Ankara, Turkey 235, Ekonomik Yaklasim Association.
    11. Dirk Hackbarth & Richmond Mathews & David Robinson, 2014. "Capital Structure, Product Market Dynamics, and the Boundaries of the Firm," Management Science, INFORMS, vol. 60(12), pages 2971-2993, December.
    12. Iavor Marangozov, 2005. "From Practice to Theory of the International Joint Ventures," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 44-77.
    13. Durugbo, Christopher & Tiwari, Ashutosh & Alcock, Jeffrey R., 2013. "Modelling information flow for organisations: A review of approaches and future challenges," International Journal of Information Management, Elsevier, vol. 33(3), pages 597-610.
    14. De Chiara, Alessandro & Engl, Florian & Herz, Holger & Manna, Ester, 2022. "Control Aversion in Hierarchies," FSES Working Papers 527, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    15. Max Zongyuan Shang & Ken McEwan, 2021. "The make‐or‐buy decision of feed on livestock farms: Evidence from Ontario swine farms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(3), pages 353-368, September.
    16. Jiangbo Yu, 2022. "An elementary mechanism for simultaneously modeling discrete decisions and decision times," System Dynamics Review, System Dynamics Society, vol. 38(3), pages 215-245, July.
    17. Heloïse Berkowitz & Marcelo Bucheli & Hervé Dumez, 2017. "Collectively Designing CSR Through Meta-Organizations: A Case Study of the Oil and Gas Industry," Journal of Business Ethics, Springer, vol. 143(4), pages 753-769, July.
    18. Hugh Mandele & Arjen Witteloostuijn, 2015. "The inevitability and irreversibility of organizational uncontrollability," Computational and Mathematical Organization Theory, Springer, vol. 21(4), pages 380-405, December.
    19. Will, Matthias Georg & Pies, Ingo, 2014. "Discourse and regulation failures: The ambivalent influence of NGOs on political organizations," Discussion Papers 2014-2, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    20. Jiang, Marshall S. & Chu, Rongwei & Pan, Yigang, 2011. "Anticipated duration of international joint ventures: A transaction cost perspective," Journal of International Management, Elsevier, vol. 17(2), pages 175-183, June.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2210.14861. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.