Academic journal article Revue Canadienne des Sciences de l'Administration

The Relationship among Organization Structure, Information Technology and Information Processing in Small Canadian Firms

Academic journal article Revue Canadienne des Sciences de l'Administration

The Relationship among Organization Structure, Information Technology and Information Processing in Small Canadian Firms

Article excerpt

Abstract

This study reports results obtained through a mail survey of 244 small business enterprises based in Quebec. Using results from past research based on informationprocessing and information systems theory, we distinguish between the provision of internal and external information. Analysis of the data shows that contrary to expectations, structural organicity interacts negatively with IT to explain the provision of internal information. The specific structural dimension that contributes to this interaction effect is horizontal differentiation. Both results suggest that increasing deployment of IT improves the provision of internal information more rapidly when horizontal differentiation is low. No such interaction effect was found to explain the provision of external information.

Small businesses, perhaps more than other organizations, face particularly turbulent and uncertain environments (Child, 1972; Drucker, 1980). This may be explained by their limitations in securing financing and in exploiting opportunities (Timmons, 1990). Faced with increased uncertainty, an organization's response is to decrease it by developing uncertainty-reduction mechanisms. These mechanisms include organizational designs that favour the flow and processing of information the organization already possesses, and the creation or acquisition of new information.

According to the information-processing view of the firm (Connolly, 1977; Egelhoff, 1982; Galbraith, 1974; Kmetz, 1984; Tushman & Nadler, 1978) and relevant information systems literature (Bruns & McFarlan, 1987; Goodhue, Wybo, & Kirsch, 1992; Huber, 1990; Keen, 1991; Simon, 1973; Strassmann, 1990; Zuboff, 1985), two organizational design mechanisms can be used to facilitate the acquisition, analysis, and provision of information: organisational structure and information technology (IT). If, as some researchers say (Blili & Raymond, 1993; Carland, Hoy, Boulton, & Carland, 1984), small businesses perceive more uncertainty in their environment than do larger ones, they should require more information (Johnson & Kuehn, 1987). Thus, small businesses should require more informationrich organization structures and an IT capability that provides them with the information that they require. Failure to develop such capabilities handicaps small businesses (Timmons, 1990) in an environment over which they have little influence.

The effective small business must have a structural design that facilitates a rapid and an accurate assessment of its environment and an IT capability that allows for this information to be acted upon promptly. It is through the management of external information that businesses will be able to reduce the uncertainty that they perceive in their environment (Gordon & Narayanan, 1984; Sormunen, Daft, & Parks, 1985) and through the management of internal information that all other organizational resources are managed. Information and its management for small businesses has become a fundamental issue in their survival and development (Julien, 1996).

We notice that today's small businesses are investing more in IT (Carriere & Julien, 1992; Julien, 1995). They do so to increase their information-processing capacity and to remain competitive (Cafferata & Mensi, 1995; McMillan, 1987; Tornatzky & Fleischer, 1990). The issue, however, is not whether small businesses have computers, but how well they use them. It has been demonstrated that small businesses still do not have the necessary information-processing capability to satisfy their information requirements (El Louadi, 1994; Rothwell, 1984) nor do they have the necessary IT capability to acquire and process the information that they need (Lehman, 1986; Miller, 1986).

There also seems to be a consensus in the literature on the types of structures that are more appropriate in different types of environments: flexible and decentralized structures with open channels of communication are more appropriate in uncertain environments, whereas highly formalized, nonparticipative, tightly controlled, and inflexible structures are more appropriate in less uncertain environments (Duncan, 1972, 1973; Gresov, Drazin, & Van de Ven, 1989; Hrebiniak & Snow, 1980; Keller, Slocum, & Susman, 1974; Khandwalla, 1977; Randolph & Dess, 1984). …

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