Information Processing in Firms and Returns to Scale

Abstract

The study of returns to scale in firms has traditionally focused on technological returns to scale in the production process. However, as the scale of a firm's production grows, so does its administrative apparatus. The process of managing a firm, although not as well understood nor as extensively studied as the production process itself, uses significant resources and is important to the profitability of the other operations in the firm. Therefore, this process may also have a significant impact on returns to scale. The purpose of this paper is to explore this impact.