The adoption of information technology (IT) in organizations has been growing at a rapid pace. The use of the technology has evolved from the automation of structured processes to systems that are truly revolutionary in that they introduce change into fundamental business procedures. Indeed, it is believed that “More than being helped by computers, companies will live by them, shaping strategy and structure to fit new information technology .” While the importance of the relationship between information technology and organizational change is evidenced by the considerable literature on the subject,1 there is a lack of comprehensive analysis of these issues from the economic perspective. The aim of this article is to develop an economic understanding of how information systems affect some key measures of organization structure.
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