Organizational Structure and Information Technology : Elements of a Formal Theory

There are three parts of this paper. The first part (1) discusses the kinds of theories needed to understand the consequences of information technology for organizational structure and (2) reviews a number of previous models of organizational design. In the second part of the paper, a new model is presented that helps integrate and formalize some of the previous work. This model distinguishes several generic organizational structures and identifies tradeoffs between them in terms of coordination costs, productivity, and adaptability. The model is unusual in that it includes mathematical derivations of qualitative results that summarize several important principles from previous research on organizational design. In the last section of the paper, the model is used to help explain several major historical changes in the structure of American businesses and to help predict changes that may occur in the future with the widespread use of information technology.