The Information Bottleneck Principle in Corporate Hierarchies

TL;DR

This paper explores how the information bottleneck principle can be applied to corporate hierarchies, linking organization theory with neural network concepts to improve understanding of information transmission.

Contribution

It introduces the application of the information bottleneck principle to corporate hierarchies, bridging organization theory and neural network research for better information flow understanding.

Findings

Highlights the relevance of the information bottleneck in corporate decision-making

Proposes the use of skip connections for efficient information transmission

Connects organizational structures with neural network architectures

Abstract

The hierarchical nature of corporate information processing is a topic of great interest in economic and management literature. Firms are characterised by a need to make complex decisions, often aggregating partial and uncertain information, which greatly exceeds the attention capacity of constituent individuals. However, the efficient transmission of these signals is still not fully understood. Recently, the information bottleneck principle has emerged as a powerful tool for understanding the transmission of relevant information through intermediate levels in a hierarchical structure. In this paper we note that the information bottleneck principle may similarly be applied directly to corporate hierarchies. In doing so we provide a bridge between organisation theory and that of rapidly expanding work in deep neural networks (DNNs), including the use of skip connections as a means of more efficient transmission of information in hierarchical organisations.