Organizational Restructuring in Response to Changes in Information-Processing Technology
CERGE-EI Working Paper Series No. 98
25 Pages Posted: 28 Jan 2010
Date Written: May 1, 1996
This paper analyzes the effects of changes in information-processing technology on the efficient organizational forms of data- processing in decision-making systems. Data-processing in decision-making is modeled in the framework of the dynamic parallel-processing model of associative computation with an endogenous duration of operations. In such a model, the conditions for the efficient organization of information-processing are defined and the architecture of the efficient structures is considered. It is shown that decreasing returns to scale of the information-processing function and the information overload of the system are necessary and sufficient conditions for the decentralized (hierarchical) information-processing, respectively. Moreover, the analysis shows that the size of the efficient structures is determined exclusively by their information workload and the existing information-processing technology. In particular, the results indicate that, for a given information workload, the size of information-processing structures in decision-making systems is inversely related to the degree of homogeneity of the information-processing function. Consequently, the organizational restructuring of decision-making systems towards flatter hierarchical structures can be explained exclusively by those technological changes which affect economies of scale in information-processing, i.e., which increase the degree of homogeneity of the information-processing function.
Keywords: Technological changes, organizational restructuring, hierarchy, decision-making, information-processing
JEL Classification: O33
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