Information and organization for horizontal multimarket coordination
Management Science - Special issue: Frontier research on information systems and economics
A meta decision support system approach to coordinating production/marketing decisions
Decision Support Systems - Special issue on decision support technologies for complex and open organizations
Hans Ulrich Buhl, Andreas Will
HICSS '98 Proceedings of the Thirty-First Annual Hawaii International Conference on System Sciences-Volume 4 - Volume 4
IT-Enabled Incentive Schemes in Telephone Banking
HICSS '97 Proceedings of the 30th Hawaii International Conference on System Sciences: Information System Track-Organizational Systems and Technology - Volume 3
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Information technology (IT) is enabling large companies and particularly banking firms to create new forms of organizations. Both globalization of markets and stronger regulation throughout the world puts pressure on banking firms to either spend more money coordinating business activities in the traditional hierarchical ways or to employ new forms of organizations enabled by (lower costs of) IT. When facing uncertain demand in multiple horizontal markets, resource allocation problems occur. Accordingly, the location of decision authority in a multilevel hierarchical organization has profound impact on the performance of the firm. The firm has to design its coordination structure, which determines who makes the resource allocation decisions. Considering the tradeoff between pooling effects in the case of centralized decision-making and better assessment of local markets in the case of decentralized decision-making, the decision problem where to locate decision rights to maximize total profits has to be solved. In this paper we investigate for both independent and dependent demands the total profits for each of the possible coordination mechanisms: centralized decision-making, decentralized decision-making, and intermediate-level decision-making. It turns out that—depending on the crucial parameters of the firm—decentralized decision-making or centralized decision-making may be optimal. But in many relevant cases the optimal location of decision rights is at an intermediate level of the hierarchy. We illustrate the findings by considering the banking firm coordinating equity capital allocation by granting alternative decision rights to their employees as participants on electronic financial markets. Finally we discuss the generality of the approach and its applicability in other areas such as inventory management.