Faculty of Economics and Business Administration Publications Database

Division of labor and the organization of knowledge in production: A laboratory experiment

Klockmann, Victor
von Schenk, Alicia
Volume: 130
Pages: 196 - 210
Month: November
ISSN-Print: 0899-8256
Link External Source: Online Version
Year: 2021
Keywords: Knowledge;Division of labor;Organizational economics

Following Garicano (2000), we consider groups whose members decide what knowledge to acquire and how to use this knowledge in production. If efficient production requires common knowledge, all group members should become workers and acquire common knowledge. But if efficient production requires diverse knowledge, one group member should become manager, acquire rare knowledge, and stand ready to help the other workers. In our laboratory experiment, we find that most groups eventually manage to coordinate on an efficient division of labor. Still, we find substantial adoption frictions. Coordination takes time, and some groups coordinate on an inefficient division of labor, probably because they do not know what specialization of knowledge is most efficient.