MIS 9003 – Prof. Min-Seok Pang

Bloom et al 2014 -Siddharth Bhattacharya

The paper talks about how information technology is a decentralizing force, whereas communication technology is a centralizing force. The paper argues that these technologies have at least two distinct components, information technology (IT) and communications technology (CT). The paper studies the differential impact on the organization of firms of these two types of technology (information versus communication) and applies this framework in a world with two types of decisions, production and nonproduction ones. Results show that, technologies that lead to falling information costs for nonproduction decisions (like ERP) tend to empower plant managers (relative to the headquarters), and technologies that lead to falling information costs for production decisions (like CAD/CAM) tend to empower workers relative to plant managers. In other words, a technology that lowers information costs increases the autonomy of the lower-level agent (a worker in the production case, a plant manager in the nonproduction case), whereas a technology that lowers communication costs reduces this autonomy. The study relies on a new data set that combines plant-level measures of organization and ICT hardware and software adoption across the United States and Europe as part of a large international management survey. For identification, the authors rely on simple conditional correlations between the different ICT measures and the multiple dimensions of the organization of the firm. Instrumental variables show increased robustness of the results. The work solves the conundrum in literature that takes s information technology (IT) and communication technology (CT) into a single homogeneous category and shows that e impact of IT and CT on the organization of firms, and ultimately income inequality, will be quite different depending on the type of technology used.

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