Week 11_Bloom et al (2014)_Xue Guo

The distinct Effects of Information Technology and Communication Technology

This paper studies the impact of information and communication technology (ICT) on worker and plant manger autonomy and span of control. Different from prior literature, which treats ICT as an aggregate capital stock, this paper examines the differential impacts on the organization of firms for two types of technologies—information technology (IT) and communication Technology (CI).

The paper proposes that IT is associated with decentralized decision making and CT is associated with centralized decision making. Based on the cognitive view of hierarchy, information technologies increase the availability of information and improve the workers’ ability to solve design and production problems, which lead to higher autonomy. On the contrary, technologies that reduce the cost of with-in firm communication will pass decisions to the center of the firm.

Empirically, the paper utilizes a new international plant-level data set with directly measured indicators of organization and technologies. The results shown that information technologies (ERP and CAD/CAM) are associated with greater plant manager autonomy, worker autonomy and span of control. However, the communication technology such as intranets is associated with lower plant manager autonomy. In extension, the paper also adds two instrumental variables—distance from the place of origin of the market leading ERP system and the differential regulation of the telecommunication industry across countries. And the results still hold after the robustness check.

This paper presents contradict results from prior studies. It provides theoretical and empirical evidence that organization structure of decision making are depending on different type of technology.