The Distinct Effects of Information Technology and Communication Technology on Firm Organization

Nicholas  Bloom; Luis  Garicano; Raffaella  Sadun; John  Van Reenen

Article | Management Science | December 2014

The Distinct Effects of Information Technology and Communication Technology on Firm Organization

by Nicholas Bloom, Luis Garicano, Raffaella Sadun and John Van Reenen

Abstract

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 U.S. and seven European countries we study the impact of ICT on worker autonomy, plant manager autonomy, and span of control. Consistent 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) strengthens our results.

Keywords: Communication Technology; Information Technology; Organizational Structure;

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Citation:

Bloom, Nicholas, Luis Garicano, Raffaella Sadun, and John Van Reenen. "The Distinct Effects of Information Technology and Communication Technology on Firm Organization." Management Science 60, no. 12 (December 2014): 2859–2885.

Case | HBS Case Collection | September 2019

Earth Bank of Codes: Making Nature's Biological Assets Visible and Valuable for the Benefit of All

Tarun Khanna, Raffaella Sadun and Susie Ma

In 2019, entrepreneur Juan Carlos Castilla-Rubio was developing a project he hoped could generate and share wealth from the natural resources of the Amazon without destroying those resources. His idea, called Earth Bank of Codes (EBC), would create a library of the genomic codes of all known species that could be tapped for discovery and innovation, from new medical interventions to more efficient manufacturing processes. He proposed to use blockchain technology to make the data both accessible and trackable so that its use could be monitored. Castilla-Rubio envisioned a time when a company in the U.S. could access a biological asset from the Peruvian Amazon, develop and commercialize a product based on the asset, and have a fraction of the resulting sales land directly in the bank account of various beneficiaries, including the Peruvian government and indigenous communities. Now he was facing major decisions about how to structure EBC to achieve his goals. Should he start at the top and build partnerships with national governments and inter-governmental organizations as the cornerstone of EBC? Or would it be better to forge ahead with a few stakeholders in an entrepreneurial project?

Keywords: Decision Making; Development Economics; Entrepreneurship; Innovation and Invention; Intellectual Property; Emerging Markets; Market Design; Marketplace Matching; Science; Genetics; Natural Environment; Environmental Sustainability; Climate Change; Social Enterprise; Strategy; Strategic Planning; Technology; Ownership; Social Psychology; Trust; Society; Biotechnology Industry; South America; Amazon Basin;

Citation:

Khanna, Tarun, Raffaella Sadun, and Susie Ma. "Earth Bank of Codes: Making Nature's Biological Assets Visible and Valuable for the Benefit of All." Harvard Business School Case 720-356, September 2019. View Details

Cite View Details Educators

Plant management at Pasta Serafina, a pasta producer in the south of Italy, is struggling to contain employee absenteeism. While the misbehavior is concentrated in a minority of the workers, its effects impact not only the plant’s performance, but also the climate and work environment. Embedded in an institutional and legal environment that allows very little room for corrective action, and already dealing with persistent low margins, management decides to address the issue by asking the employees themselves to find a solution to the problem. The case exposes students to managerial challenges associated with curbing moral hazard and changing the company culture in a setting where standard legal and contractual tools, such as firing workers for performance or using incentives to influence behaviors, are not available.

The case complements Pasta Serafina (A) by describing the aftermath of a town hall meeting in which management had publicly denounced the absenteeism problem and challenged the employees to find a solution. In spite of the initial mistrust against management, the fear of an imminent plant closure coupled with the relief associated with finally being able to be heard by management, pushes the employees to act to contain the problem themselves. Within a short time, absenteeism hits record lows. Management, however, is left wondering about the sustainability of the new culture.

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The Distinct Effects of Information Technology and Communication Technology on Firm Organization

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