Technological progress, organizational change and the size of the Human Resources Department



and Borland, 1991, Tamura, 1992). Some papers examine the impact of ICT on
coordination (Brynjolfsson et al., 1994), but very few papers analyze the role of
coordination costs per se (see e.g. Becker and Murphy, 1992, or Hobijn, 1999). As
coordination costs are multi-faceted, the theoretical literature has focused on various
types of costs borne by the firm and the employees, among which:

- Switching costs between activities in terms of time, response delay or reduced
goods quality (Lien et al. 2003, 2006).

- Communication costs and knowledge acquisition costs between workers (see Des-
sein and Santos, 2003, Bolton and Dewatripont, 1994, Radner, 1993, Garicano,
2000, Borghans and Ter Weel, 2006). In Garicano’s model, for instance, higher lay-
ers of problem solvers in the firm increases the utilization rate of knowledge, thus
economizing on knowledge acquisition, at the cost of increasing the communication
required.

- Administrative coordination costs (assigning tasks, allocating resources and in-
tegrating outputs) and expertise coordination costs (managing knowledge and skill
dependencies for complex, nonroutine intellectual tasks) (see Faraj and Sproull,
2000).

- Contracts incompleteness (see Acemoglu, Antras and Helpman, 2005). The basic
idea here is that a firm decides a range of tasks to be performed and the division
of labour among its workers. Coordination costs come from the fact that only a
fraction of the activities that workers have to realize are contractible, the others are
nonverifiable and noncontractible (and lead to under-investment).

To account for such a variety of coordination costs, we propose here a typol-
ogy that distinguishes two categories of internal coordination costs: horizontal and
vertical coordination costs.

Horizontal coordination costs are the costs (at the firm level) of coordi-
nating the tasks realized by each production worker. They embed switch costs
between tasks, inter-tasks learning and information sharing costs, but also the
strain associated with versatility and stressful working conditions. Such costs
mainly concern production workers.

Vertical coordination costs are the costs of coordinating workers, that
is the “costs of managers and others who decide when, where and how to
produce” (Brynjolfsson et al., 1994). Coordinating workers is a costly activity
which induces expenses in addition to the direct wage costs of human resources
managers and specialists. Vertical coordination costs mainly concern workers
employed in human resources services.

From an empirical perspective, an important and complex problem lies in mea-
suring the costs resulting from work organization and occupational conditions and
changes. Coordination costs may result in poor working conditions, excessive and



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