Information technology and business transformation : work location and the allocation of decision rights
Author(s)Fitoussi, David, 1974-
Sloan School of Management.
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(cont.) as well, firms have an incentive to require coordinated investments in technology across the enterprise. Still, research in IS has also highlighted the fact that the productivity of computer investments is highly dependent on co-investment in complementary assets (for instance, tacit knowledge and specialized work processes). Many of these additional investments are intangible and highly dependent on the local expertise and the knowledge of the branch or division. When local knowledge is important, the uninformed headquarters have an incentive to delegate decision rights to the local branch. I develop a mathematical model to analyze this tradeoff and derive testable hypotheses that relate IT investment diversity and the allocation of decision rights. Decentralization leads to less uniform IT investments and is more likely the less vertically integrated the firm is. I also provide some empirical support for these hypotheses using a large dataset of firms' IT investments and allocation of purchasing decision rights.This thesis examines the relationship between IT investments and the transformation of business practices and organizational structure. In particular, I consider the impact of IT on the location of work and on the allocation of decision rights. I first study how a firm's IT intensity can affect its ability to exploit regional cost differentials and locate in lower-cost areas. I develop a framework to analyze the effects of IT on the regional distribution of work for a homogenous set of Fortune 1000 manufacturing firms. I estimate the regional demand for customer-service representatives by firms using firm-level data. The framework is a discrete choice model in which regions play the role of differentiated products. I allow for flexible substitution patterns between regions by using random coefficients. The latent variable of the model, the firm's profits from customer care, is derived from the premises of a queueing (stochastic) process. The estimated demand structure is used to assess the effects of information technology on customer volume, location choices and cost savings. The results confirm the higher cost sensitivity of IT-intensive firms, but also suggest that the ability to exploit cost differentials is highly firm-specific and that the importance of geographically-localized externalities does not vanish. I then develop and test a model to analyze how the allocation of purchasing decision rights across geographically-dispersed business units influences their IT investment choices. Since the productivity of many information technologies (in particular communication technologies) relies on network effects in which the marginal productivity of the adoption of a technology by a site is higher if the rest of the firm adopts this technology
Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2004.Includes bibliographical references (leaves 112-120).
DepartmentSloan School of Management.
Massachusetts Institute of Technology
Sloan School of Management.