Information Technology and Organizational Design: Evidence from Micro Data

While many theories about the relationship between information technology (IT) and organizational design have been proposed, there is little empirical evidence on the issue. We examine the influence of organizational design on the demand for IT and the productivity of IT investments, using data from approximately 380 US firms. We find greater demand for IT in firms with greater decentralization of decision rights (especially the use of self-managing teams), and greater investments in human capital, including training and screening by education. In addition, IT has a greater contribution to output in firms that adopt a more decentralized and human capital-intensive work system. This relationship is robust to alternative measures of IT and of work systems, as well as alternative specifications for demand and for productivity. These findings lend support to the idea that organizational practices are important determinants of IT demand and productivity.