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Authority in the context of distributed knowledge

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The notion of distributed knowledge is increasingly often invoked in discussions of economicorganization. In particular, the claim that authority is inefficient as a means of coordination inthe context of distributed knowledge has become widespread. However, very little analysis hasbeen dedicated to the relation between economic organization and distributed knowledge. In thispaper, we concentrate on the role of authority as a coordination mechanism under conditions ofdistributed knowledge, and also briefly discuss other issues of economic organization. We clarifythe meanings of authority and distributed knowledge, and criticize the above claim by arguingthat authority may be a superior mechanism of coordination under distributed knowledge. Wealso discuss how distributed knowledge influences the boundaries of firms. Our arguments relyon insights in problem-solving and on ideas from organizational economics.

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Kirsten Foss, Nicolai J. Foss

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