How it Affects Organizational Structure: A Historical Perspective

Researchers have widely observed that information technology plays an important role in shaping organizations and molding the nature of work (Bartezzaghi et al., 1981; Benjamin & Levinson, 1993; Drucker, 1988; Huber, 1990; Malone & Rockart, 1993; Wang, 1997; Whisler, 1970). Naturally, this role is indirect: changes in technology affect information flow and the potential for information flow, and these, in turn, affect organizational structure.

Nearly half a century ago, Leavitt and Whisler (1958) proposed advances in information technology would allow large industrial organizations to centralize control and decision making and it would radically alter the nature and organization of middle management jobs. The authors theorized that top executives would be less dependent on subordinates, because computers would allow these top executives to recognize and react to everything of importance that occurred, even in the most dispersed and complex organizations. Middle management tasks would become routine and business groups would be merged. Roughly 10 years later, when the predicted trend toward re-centralization failed to materialize, Dearden (1967), responded that although computers might centralize logistics, top management lacked both the time and the expertise to centralize all but the most important decisions. Lawrence and Lorsch (1967) noted increased differentiation of departments or data necessitated an increase in integration mechanisms, but allowed for decentralization of task and structure. With the further development of communication infrastructure and computer networking in the early 1980s, Leavitt and Whistler's argument seemed to reassert itself. Researchers argued, for example, information systems could extend the control of headquarters over foreign subsidiaries that would otherwise distance themselves from the home office as they matured (Prahalad & Doz, 1981).

The computer's role in automation was also recognized as affecting the organizational structure of manufacturing firms (Bartezzaghi et al., 1981). Clutterback (1979) hypothesized that the increasing power of information processing would narrow the distinction between blue-collar and white-collar workers and could reduce or eliminate the need for middle management. Attewell and Rule (1984), in a meta-study of research addressing the impact of computerization on factors such as job satisfaction, unemployment, inter-occupational change, and work redesign, found the impact of IT is inconclusive.

Wide area networks made possible inter-organizational information systems, which increased the opportunities for competitive alliances crossing organizational boundaries (Cash & Kosynski, 1985). By the late 1980s and early '90s, information technology was blamed for industry trends towards decentralization and downsizing (McDowall, 1985), and praised for enabling efficiencies through business process redesign (Brynjolfsson et al., 1994; Hammer, 1990). Later, researchers argued the widespread acceptance of client server computing precipitated movement from a command-and-control structure to decentralized authority and growth in teamwork and team-based management (Hitt & Brynjolfsson, 1997).

Clayton Christensen has popularized the term "disruptive technology" as one that enables innovative companies to create new business models that alter the economics of their industry (Christensen, 1998; Christensen & Tedlow, 2000). The technology of electronic commerce is clearly such a force in many industries. It has not only changed business models, but in so doing, it has also affected the structure of companies competing in this environment.

The concept of the virtual organization (Davidow & Malone, 1992) predated, but anticipated, the widespread use of the Internet for electronic commerce. Other models, such as the creative Web (Conklin & Tapp, 2000), e-network (Davenport, 2000), value net (Brandenburger & Nalebuff, 1997; Nalebuff & Brandenburger, 1997), and e-lance structure (Malone & Laubacher, 1998), although differing in details, share the concept of a dynamic, flexible structure with blurred organizational boundaries.