Information Technology and Organizational Design: Locating Decisions and Information

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dc.contributor.authorNault, Barrie R
dc.date.accessioned2015-05-25T22:17:53Z
dc.date.available2015-05-25T22:17:53Z
dc.date.issued1998-10
dc.description*INFORMS: unless published under the open access option, the publisher will provide a specific copy of the paper that can be posted to a web page https://www.informs.org/Find-Research-Publications/INFORMS-Journals/Rights-Permissions#work. Publisher provided copy of the article posted according to publisher's policy 0522/2015en_US
dc.description.abstractWe study the impact of information technology (IT) on the profitability of individual organization designs and on the relative profitability of different organization designs. We develop models where organization design is defined by the location of investment decision authority. We consider global and local investment when there is an information asymmetry between a central authority and decentralized nodes—decentralized nodes make better local investment decisions because of their local knowledge. We define three separate organization designs: a hierarchy where all investments are made by a central authority, a market where all investments are made by the decentralized nodes, and a mixed mode where global investments are made by a central authority and local investments are made by decentralized nodes. Because of complementarities between global and local investment, we show that there is underinvestment relative to first-best in all three organization designs. We also find that IT can be used to mitigate that underinvestment, either by bringing information to the decision maker or by redesigning the monitoring and incentive structure. We demonstrate that IT does not necessarily favor decentralized organization designs, and we show how the costs of coordination may result in the mixed mode being dominated by one or both of the alternative organization designs. Thus, collocation of investment decision rights and information that results in decisions that require coordination might not be optimal when the costs of not synchronizing global and local investment are high.en_US
dc.identifier.citationNault, B.R., "Information Technology and Organizational Design: Locating Decisions and Information," Management Science, 44, 10, (October 1998), 1321-1335en_US
dc.identifier.doihttp://dx.doi.org/10.11575/PRISM/28803
dc.identifier.issn1526-5501
dc.identifier.urihttp://hdl.handle.net/1880/50443
dc.language.isoenen_US
dc.publisherINFORMSen_US
dc.publisher.corporateUniversity of Calgaryen_US
dc.publisher.departmentManagement Information Systemsen_US
dc.publisher.facultyHaskayne School of Businessen_US
dc.publisher.institutionUniversity of Calgaryen_US
dc.subjectCentralization/Decentralizationen_US
dc.subjectCollocationen_US
dc.subjectDecision Rightsen_US
dc.subjectInformation Asymmetryen_US
dc.subjectNetwork Externalitiesen_US
dc.subjectOrganizational Formen_US
dc.titleInformation Technology and Organizational Design: Locating Decisions and Informationen_US
dc.typejournal article
thesis.degree.disciplineManagement Information Systemsen_US
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