How Does Internal Communication Technology Affect Internal Information: Theory and Evidence

80 Pages Posted: 16 Dec 2022 Last revised: 15 Dec 2024

See all articles by Ehsan Azarmsa

Ehsan Azarmsa

University of Illinois Chicago, College of Business Administration

Lisa Yao Liu

Columbia University - Columbia Business School

Suzie Noh

Stanford Graduate School of Business

Date Written: December 15, 2024

Abstract

We study how enhanced internal communication technology influences firms' internal information production. By developing a model with a headquarters manager and several divisional managers, we formalize two competing economic forces—information learning and free riding—that shape the headquarters manager's information precision. While the technology helps the headquarters manager collect information from divisional managers, it also reduces divisional managers' incentives to acquire information because they anticipate others will do so. To test the theory's predictions, we use firms' intranet usage as a proxy for advancements in internal communication technology and management forecast accuracy as a measure of internal information quality. Our empirical analysis reveals an inverted U-shaped relation and provides supporting evidence for the two economic forces in our model. Collectively, our findings offer novel insights into the trade-offs organizations face as they adopt advanced communication technologies and contribute to understanding the evolving dynamics of internal information production.

Keywords: organizational communication, communication technology, internal information environment

JEL Classification: D80, D83, L20, M15, M21, M41

Suggested Citation

Azarmsa, Ehsan and Liu, Lisa Yao and Noh, Suzie, How Does Internal Communication Technology Affect Internal Information: Theory and Evidence (December 15, 2024). Columbia Business School Research Paper , Stanford University Graduate School of Business Research Paper No. 4292147, Available at SSRN: https://ssrn.com/abstract=4292147 or http://dx.doi.org/10.2139/ssrn.4292147

Ehsan Azarmsa

University of Illinois Chicago, College of Business Administration ( email )

University Hall, 601 S Morgan St
Chicago, IL 60654
United States
3122567183 (Phone)

Lisa Yao Liu (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Suzie Noh

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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