IT & Decision Making
Does IT encourage centralization or decentralization?
IT can encourage both centralization (by improving data processing efficiency) and decentralization (by enabling remote decision-making).
What is the difference between internal and external coordination costs?
What is the difference between internal and external coordination costs?
How does IT help reduce agency costs?
IT improves monitoring, reducing information asymmetry between managers and owners.
What is the first step in the IT innovation wave?
A new business application emerges ("Breaking the Surface").
What is IT fashion?
A temporary belief that an IT innovation is new, efficient, and necessary.
How does IT reduce decision-making costs?
IT reduces decision-making costs by providing faster access to data, automating processes, and reducing the need for middle management.
How does IT affect a firm's vertical size?
IT reduces vertical size by making outsourcing easier.
What does transaction cost theory say about IT?
IT reduces market transaction costs, making outsourcing more attractive.
What does "critical mass" mean in IT adoption?
t's the number of adopters needed for an innovation to gain momentum.
Why do firms adopt IT innovations beyond improving performance?
To increase legitimacy and follow industry trends.
Give an example of IT enabling decentralization.
Cloud computing allows employees to work remotely while management retains centralized control over resources.
What are the cost trade-offs of IT adoption?
IT can lower costs long-term but requires high upfront investment.
How do agency and transaction cost theories explain outsourcing?
IT lowers monitoring and coordination costs, making outsourcing more attractive.
What role does hype play in IT adoption?
It drives early interest but may fade before the technology is widely used.
What are the three key factors in deciding to adopt a trending IT innovation?
Reputation, executive pay, and business performance.
How can IT simultaneously centralize and decentralize decision-making?
It centralizes data control but enables decentralized decision-making by employees.
How does IT lower transaction costs?
It reduces search, negotiation, and monitoring costs for external transactions.
How does IT reduce agency costs in multinational firms?
It improves real-time monitoring of managers and subsidiaries.
What happens when an IT innovation becomes an industry standard?
Its growth slows, but adoption becomes widespread.
What are the risks of following IT fashion trends?
Firms may invest in trends that don’t provide real value, wasting resources.
How does IT impact board decision-making?
IT improves transparency and access to real-time data
How does IT influence intra-firm trade?
It reduces coordination costs between different branches of a company.
How do industry differences affect IT’s impact on firm size?
Some industries benefit more from IT, depending on how easily processes can be automated
What happens when an IT innovation reaches critical mass?
It gains momentum and becomes widely adopted.
How can IT fashion affect executive pay?
Executives may be rewarded for adopting trends, even if they don’t improve performance.