The distinct effects of information technology and communication technology on firm organization
By: Nicholas Bloom, Luis Garciano, Raffaella Sadun, John Van Reenen
Contributors: Harvard Business School
Series: Working paper / Harvard Business School -- 11-023
Publisher: Harvard Business School
Published: 2010
Place of publication: [Boston]
Language: eng
Number of pages: 57
Description: Empirical studies on information communication technologies (ICT) typically aggregate the 'information' and 'communication' components together. We show theoretically and empirically that this is problematic. Information and communication technologies have very different effects on the decisions taken at each level of an organization. Better information access pushes decisions down, as it allows for superior decentralized decision making without an undue cognitive burden on those lower in the hierarchy. Better communication pushes decisions up, as it allows employees to rely on those above them in the hierarchy to make decisions. Using an original dataset of firms from the US and seven European countries we study the impact of ICT on worker autonomy, plant manager autonomy and span of control. Consistently with the theory we find that better information technologies (Enterprise Resource Planning, ERP, for plant managers and CAD/CAM for production workers) are associated with more autonomy and a wider span of control. By contrast, communication technologies (like data networks) decrease autonomy for both workers and plant managers. Treating technology as endogenous using instrumental variables (distance from the birthplace of ERP and heterogeneous telecommunication costs arising from different regulatory regimes) strengthen our results. Keywords: organization, delegation, information technology, communication technology, the theory of the firm.
Notes: "September 2010"--Publisher's website.

Includes bibliographical references.