Abstract

In this monograph, we adopt the perspective of organizations as processors of knowledge that collect, create, combine and/or analyze data through information technology (IT) to locate and coordinate decisions, improve performance evaluations, and enhance interest alignment. We distinguish between information communication and information processing technologies. Pivotal to our framework is whether IT improves coordination or improves incentives, and thereby the extent of (de)centralization. We document that evidence on IT’s effect on (de)centralization is ambiguous, but reconcile how advanced IT may improve decisions and lower agency costs. Complementarities thus feature strongly in our rendering of IT’s effects on organizational design. We end with some suggestions, such as the need to consider the lifecycle of IT effects, acknowledging the slow and complex, though pervasive, nature of technology adoption in organizations.

The Information Organization: On Changes in Information Technology and Organizational Design

The Information Organization explores how recent advances in information technology and communication capabilities have changed and have the potential to change organizations. The authors distinguish between different types of IT, particularly communication technology and information (processing) technology. This is an important feature of the monograph as it distinguishes different types of IT advances in relation to specific types of decisions and/or other organizational design features.

Regarding information organization, this work emphasizes the transmission, analysis, and use of information, i.e., information communication and processing. The authors then focus on three specific aspects of organizations: decision-making and coordination; performance evaluation; and incentives. These have sometimes been called the “three legs of the stool” of organizational design and are core to management accounting and control.

The monograph systematizes some of the thinking in this area, puts evidence in context, and stimulates further theoretical and empirical research. Section 2 provides a general perspective on the deployment of IT in organizations. Section 3 sketches a framework for thinking about organizational design, emphasizing its role in using knowledge. Section 4 discusses research on the effects of IT on decision-making and coordination. Section 5 reviews the impact of IT on performance evaluation and incentives. Finally, Section 6 synthesizes these findings and proposes some avenues for future research.