Information technology and the structure of the multinational enterprise
Reddy, Sabine Beate
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https://hdl.handle.net/2142/23528
Description
Title
Information technology and the structure of the multinational enterprise
Author(s)
Reddy, Sabine Beate
Issue Date
1994
Doctoral Committee Chair(s)
Hennart, Jean-Francois
Department of Study
Business Administration, Management
Discipline
Business Administration, Management
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Management
Language
eng
Abstract
This study focuses on the impact of advanced information technologies on the organization of large firms. Advanced information technologies are technologies that use electronic media to support communication. These technologies are interesting to study, because they may improve communication and control flows within the organization, even more so, in the international context where cultural and geographical gaps must be bridged.
First, a model is developed that draws on the literatures of transaction cost theory, information processing theory, and coordination theory. Firms pursuing a strategy of global coordination use administrative, integrative, and organizational control mechanisms to align goals and objectives of their geographically dispersed corporate entities. Information technology is understood as an additional coordination tool available to firms. Second, a taxonomy of information technology tools is generated that enables us to group specific technologies according to their capability to enhance information flows, to enhance the analytical capabilities of organizational units, or both. The postulated effects of using information technology for organizing firms vary depending on the type and location of the technological tools applied.
A two-stage empirical study in the pharmaceutical industry identifies the relevant technological tools, as well as the competitive imperatives that call for tighter global integration of operations. During the first stage, interviews were conducted with financial directors and information systems managers at the headquarters and in selected European affiliates of 7 large U.S. based pharmaceutical companies. Subsequently questionnaires were mailed to the European subsidiaries of all U.S. based publicly listed pharmaceutical firms. Data were collected on the types of information technologies used by the affiliates, on their organizational configuration and structure, and on the use of other administrative and integrative coordination mechanisms.
Under the strategic imperative to regionally coordinate dispersed subsidiary activities in Europe, this study finds that technologies enhancing information flows between units matter marginally as coordination tools. Software applications that are integrated across different company sites substitute for exhaustive corporate planning. Electronic reporting enhances the planning process. Integrated software applications also substitute for travel of managerial staff between corporate sites. No support was found for the notion that tighter coordination of dispersed and specialized corporate affiliates requires a higher level of information technology sophistication. Subsidiary autonomy is greater in subsidiaries that are sophisticated users of information technology.
It is commonly claimed that information technology has become a pervasive component of society and business. The results of this study provide a clearer picture of the extent to which information technology has actually affected international business practice and organizational structure. Thus, this study merges the conceptual model of the role of information in organizations with an actual understanding of the technological realities in firms.
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