The Influence of Information Technology on the Use of Loosely Coupled Organizational Forms: An Industry-Level Analysis

Arvin Sahaym (), H. Kevin Steensma () and Melissa A. Schilling ()
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Arvin Sahaym: College of Business, Washington State University, P.O. Box 644750, Pullman, Washington 99164
H. Kevin Steensma: University of Washington, MacKenzie Hall, Box 353200, Seattle, Washington 98195, and Grenoble École de Management, 12, rue Pierre Semard, Grenoble, France
Melissa A. Schilling: Stern School of Business, New York University, 44 West Fourth Street, New York, New York 10012

Organization Science, 2007, vol. 18, issue 5, 865-880

Abstract: Information technology (IT) enhances coordination both within the firm and between the firm and its external partners. Consequently, IT investment can promote both loosely and tightly coupled organizational forms. Indeed, in some industries, widespread investment in IT is associated with high levels of disaggregation. In other industries, this is not the case. We argue that the specific influence of IT on firm boundaries depends on the broader industrial context. We investigate conditions whereby IT investments enable industries to be more loosely coupled through alliance formation and the use of contingent workers. We use transaction cost and modular systems theory to ground our theoretical development. The extent to which industrywide IT investment is associated with loosely coupled organizational forms depends on (1) limited asset specificity because of industry standards, (2) the level of industry uncertainty resulting from technological change, and (3) the overall complexity of the industry in terms of diverse inputs. Specifically, when industry standards exist, IT investment leads to greater use of both alliances and contingent workers. IT investment has a stronger positive relationship with the use of contingent workers when levels of technological change are low as compared to when levels of technological change are high. When there are high levels of input diversity and industry standards exist, IT investment led to an increased use of contingent workers. Our analyses provides a more refined view of IT influence on firm boundaries.

Keywords: information technology; organizational form; interorganizational relationships (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (19)

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