The Information Costs of Organization: NLP Measures of Decision Making Capacity

Authors

  • M.J. Histen College of Wooster

DOI:

https://doi.org/10.33423/jabe.v23i2.4105

Keywords:

business, economics, Decision Making Capacity, NLP Measures, Coase’s puzzle, economic organization

Abstract

Coase’s puzzle of economic organization asks why can’t a larger firm do everything a smaller firm can do and more. Most studies underrepresent problems in decision making capacities which have been difficult to quantify. This study corroborates a more complete theory of firm using applications from natural language processing and information theory. Probit models regress an explanatory variable from textual analysis over annual reports against a discrete measure of organizational boundaries from financial disclosures. These estimates provide a cost calculus for organizing a marginal transaction internally or through markets, offering further implications for policy and managerial practice.

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Published

2021-05-11

How to Cite

Histen , M. . (2021). The Information Costs of Organization: NLP Measures of Decision Making Capacity . Journal of Applied Business and Economics, 23(2). https://doi.org/10.33423/jabe.v23i2.4105

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Articles