We show that lowering the cost of acquisition of information that a principal obtains about the performance of an agent may make it more difficult for the principal to commit to threats. Hence it will weaken incentives and can therefore be counterproductive. This phenomenon is explored in a framework where improving the quality of information makes a commitment not to renegotiate less credible. Applications to the theory of the firm are briefly explored.

We characterize efficient technical languages and study their interaction with the scope and structure of organizations. Efficient languages use precise words for frequent events and vague words for unusual ones. A broader organizational scope allows for more synergies to be captured, but reduces within-unit efficiency, since it requires a more generic language. A manager working as specialized translator may also be used to achieve between-unit coordination while maintaining separate languages. Our theory reconciles two recent well-documented phenomena within organizations: the recent increase in information centralization and the reduction in hierarchical centralization.