Electronic Markets, Hierarchies, Hubs, and Intermediaries

The impact of information technologies on organizations is difficult to predict, although critical for developing comprehensive organizational strategies. Much of the difficulty is traceable to the treatment of all information technologies as a single factor, when in fact different technologies may have drastically different impacts on the organization. Specifically, the distinction between two general classes of technologies, communication and information processing technologies, is studied. An analytical model is developed to show that these two classes of technologies have exactly the opposite impacts on the organization. Moreover, the impact also depends on the organization, and its existing structure. Communication intensive and processing intensive organizational structures are distinguished and they are shown to be impacted differently by information technologies. An analytical framework is developed to show a continuum of organizational structures, depending on their relative communication and processing intensity, and the effect of various technologies is shown to be to move the organization along that continuum. Communication and information processing technologies are shown to move the organization in opposing directions. Finally, the analytical framework is shown to be robust and valid under a wide variety of conditions, covering most real life organizations.