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1994 Working Papers

No. 161

Some Estimates of the Contribution of Information Technology to Consumer Welfare

Erik Brynjolfsson

January 1994

Over the past decade, American businesses have invested heavily in information technology (IT) hardware. Unfortunately, it has been difficult to assess the benefits that have resulted. One reason is that managers often buy IT to enhance customer value in ways that are largely ignored in conventional output statistics. Furthermore, because of competition, firms may be unable to capture the full benefits of the value they create. This undermines researchers' attempts to determine IT value by estimating its contribution to industry productivity or to company profits and revenues.

An alternative approach is to estimate the consumer surplus from IT investments by integrating the area under the demand curve for IT. This methodology does not directly address the question of whether managers and consumers are purchasing the optimal quantity of IT, but rather assumes their revealed willingness-to-pay for IT is an accurate indicator of their preferences. Using data from the US. Bureau of Economic Analysis, we estimate four measures of consumer welfare, including Marshallian surplus, exact surplus based on compensated (Hicksian) demand curves, a non-parametric estimate, and a value based on the theory of index numbers. Interestingly, all four estimates indicate that in our base year of 1987, IT spending generated approximately $50 billion to $70 billion in net value in the US. Our estimates imply that the value created for consumers from spending on IT is about three times as large as the amount paid to producers of IT equipment, providing a new perspective on the IT value debate.

CCS No. 162

Sloan No. 3571-93

Paradox Lost? Firm-level Evidence of High Returns to Information Systems Spending

Erik Brynjolfsson and Lorin Hitt

January 1994; Revised 1/97

The "productivity paradox" of information systems (IS) is that, despite enormous improvements in the underlying technology, the benefits of IS spending have not been found in aggregate output statistics. One explanation is that IS spending may lead to increases in product quality or variety which tend to be overlooked in aggregate output statistics, even if they increase sales at the firm-level. Furthermore, the restructuring and cost-cutting that are often necessary to realize the potential benefits of IS have only recently been undertaken in many firms.

Our study uses new firm-level data on several components of IS spending for 1987-1991. The dataset includes 367 large firms which generated approximately $1.8 trillion dollars in output in 1991. We supplemented the IS data with data on other inputs, output, and price deflators from other sources. As a result, we could assess several econometric models of the contribution of IS to firm-level productivity.

Our results indicate that IS have made a substantial and statistically significant contribution to firm output. We find that between 1987 and 1991, gross return on investment (ROI) for computer capital averaged 81% for the firms in our sample. We find that the ROI for computer capital is greater than the return to other types of capital investment and that IS labor spending generates several times as much output as spending on non-IS labor and expenses. Because the models we applied were essentially the same as those that have been previously used to assess the contribution of IS and other factors of production, we attribute the different results to the fact that our data set is more current and larger than others explored. We conclude that the "productivity paradox" disappeared by 1991, at least in our sample of firms.

No. 163

Combining Local Negotiation and Global Planning in Cooperative Software Development Projects

Kazuo Okamura

August 1993

In cooperative software development, each programmer has their own plans and conflicts or redundancies inevitably arise among them. We are concerned with two main problems: first, to control changes without sacrificing programmers' flexibility, and, second, to guide change activities to conform project policies. Traditional methods of change request management focus on the management process structure based on project policies while cooperative development methodologies concern mainly with the conflict resolutions among each changes. In this paper, we describe an architecture which deals with proposal of changes. Based on plan integration it seamlessly supports both change coordination through negotiations and the change management process to have changes converge until they meet the project goals.

No. 164

Answer Garden: A Tool for Growing Organizational Memory

Mark S. Ackerman

January 1994

Answer Garden allows organizations to develop databases of commonly asked questions that grow "naturally" as new questions arise and are answered. It is designed to help in situations (such as customer "hot lines" or help desks) where there is a continuing stream of questions, many of which occur over and over, but some of which the organization has never seen before. Answer Garden includes a branching network of diagnostic questions, as well as additional information retrieval methods, that help users find the answers they want. If the answer is not present, the system automatically routes the question to the appropriate expert, and the answer is returned to the user as well as inserted into the information database. Experts can also modify this network in response to users' problems. Through their normal interactions, users and experts build an organizational memory.

The thesis examines organizational memory and Answer Garden from three perspectives: in terms of organizational memory at an organizational level, information seeking at an individual level, and software systems at a technical level. It is asserted that information technology can support organizational memory in two ways, either by making recorded knowledge retrievable or by making individuals with knowledge accessible. The thesis also describes two additional organizational memory applications, the ASSIST and LiveDoc, and details the Answer Garden Substrate system underlying all three applications. Finally, the thesis reports a field study of software engineers' using Answer Garden.

No. 165

GroupLens: An Open Architecture for Collaborative Filtering of Netnews

Paul Resnick, Neophytos Iacovou, Mitesh Suchak, Peter Bergstrom, John Riedl

March 1994

Collaborative filers help people make choices based on the opinions of other people. GroupLens is a system for collaborative filtering of netnews, to help people find articles they will like in the huge stream of available articles. News reader clients display predicted scores and make it easy for users to rate articles after they read them. Rating servers, called Better Bit Bureaus, gather and disseminate the ratings. The rating servers predict scores based on the heuristic that people who agreed in the past will probably agree again. Users can protect their privacy by entering ratings under a pseudonym, without reducing the effectiveness of the score prediction. The entire architecture is open: alternative software for news clients and Better Bit Bureaus can be developed independently and can interoperate with the components we have developed.

No. 166

Genre Repertoire: Norms and Forms for Work and Interaction

Wanda J. Orlikowski, JoAnne Yates

March 1994

Using the genre perspective, we studied the electronic communication of knowledge workers collaborating on a multi-year project and found that their work and interactions were mediated by the use of four genres (or shared types) of communication. Drawing on these findings, we develop the concept of genre repertoire to designate the set of genres enacted by groups, organizations, or communities to accomplish their work. We show that the establishment of a community's genre repertoire, which typically occurs at its formation, is a process that is largely implicit and rooted in members' prior experiences of working and interacting. Once established, a genre repertoire serves as a powerful social template for shaping ho, why, and with what effect members of a community interact to get their work done. While serving to institutionalize norms and forms of work and interaction, genre repertoires can and do change over time through members' response to project events, task demands, media capabilities, time pressures, and converging community norms. The concept of genre repertoire offers organizational research a powerful way of understanding mediated work practices and interaction norms, and hence how communication technologies may be associated with changes in the work and interaction of groups, organizations, or communities.

No. 167

Shaping Electronic Communication: The Metastructuring of Technology in Use

Wanda J. Orlikowski and JoAnne Yates, Kazuo Okamura, Masayo Fujimoto

April 1994

In this paper we suggest that the use of computer-mediated communication technologies in new and fluid organizations can be facilitated by the explicit and ongoing adapting of those technologies to changing contexts of use. In an exploratory study on the use of a computer conferencing system in an R&D setting, we found that the new medium's effectiveness was significantly influenced by the intervention of a few individuals who took on a role we label technology-use mediation. These mediators shaped everyday use of the conferencing technology, modifying the technology as well as the context of use to promote effective electronic communication. Drawing on the insights of this empirical study, we develop a theoretical framework that views technology-use mediation as influencing how users structure their communication technologies, and hence as one form of metastructuring. We believe that the role of technology-use mediation constitutes a valuable mechanism for providing the ongoing attention and resources needed to contextualize what are often generic computer-mediated communication technologies to the shifting conditions of dynamic organizational forms.

No. 168

Coalition, Cryptography, and Stability: Mechanisms for Coalition Formation in Task Oriented Domains

Gilad Zlotkin and Jeffrey S. Rosenschein.

July, 1994

(To appear in the proceedings of the The National Conference on Artificial Intelligence, Seattle, Washington, July 1994.)

Negotiation among multiple agents remains an important topic of research in Distributed Artificial Intelligence (DAI). Most previous work on this subject, however, has focused on bilateral negotiation, deals that are reached between two agents. There has also been research on $n$-agent agreement which has considered ``consensus mechanisms'' (such as voting), that allow the full group to coordinate itself. These group decision-making techniques, however, assume that the entire group will (or has to) coordinate its actions. Sub-groups cannot make sub-agreements that exclude other members of the group.

In some domains, however, it may be possible for beneficial agreements to be reached among sub-groups of agents, who might be individually motivated to work together to the exclusion of others outside the group. This paper considers this more general case of $n$-agent coalition formation. We present a simple coalition formation mechanism that uses cryptographic techniques for subadditive Task Oriented Domains. The mechanism is efficient, symmetric, and individual rational. When the domain is also concave, the mechanism also satisfies coalition rationality.

No. 169

Consenting Agents: Designing Conventions for Automated Negotiation

Jeffrey S. Rosenschein and Gilad Zlotkin

(To appear in the AI Magazine, Vol 15, Fall 1994, No. 3.)

As distributed systems of computers play an increasingly important role in society, it will be necessary to consider ways in which these machines can be made to interact effectively. We are concerned with heterogeneous, distributed systems made up of machines that have been programmed by different entities to pursue different goals.

Adjusting the rules of public behavior (the rules of the game) by which the programs must interact can influence the private strategies that designers set up in their machines. These rules can shape the design choices of the machines' programmers, and thus the run-time behavior of their creations. Certain kinds of desirable social behavior can thus be caused to emerge through the careful design of interaction rules. Formal tools and analysis can help in the appropriate design of these rules.

We here consider how concepts from fields such as decision theory and game theory can provide standards to be used in the design of appropriate negotiation and interaction environments. This design is highly sensitive to the domain in which the interaction is taking place.

No. 170

Meet Your Destiny: A Non-manipulable Scheduler

Eithan Ephrati, Gilad Zlotkin and Jeffrey S. Rosenschein

(To appear in the proceedings of the Conference on Computer Supported Cooperative Work, North Carolina, October, 1994).

In this paper we present three scheduling mechanisms that are manipulation-proof for closed systems. The amount of information that each user must encode in the mechanism increases with the complexity of the mechanism. On the other hand, the more complex the mechanism is, the more it maintains the privacy of the users.

The first mechanism is a centralized, calendar-oriented one. It is the least computationally complex of the three, but does not maintain user privacy. The second is a distributed meeting-oriented mechanism that maintains user privacy, but at the cost of greater computational complexity. The third mechanism, while being the most complex, maintains user privacy (for the most part) and allows users to have the greatest influence on the resulting schedule.

No. 171

Helping CSCW Applications Succeed: The Role of Mediators in the Context of Use.

Kazuo Okamura, Masayo Fujimoto, Wanda J. Orlikowski, JoAnne Yates

(To appear in the proceedings of the Conference on Computer Supported Cooperative Work, North Carolina, October, 1994).

August 1994

This study found that the use of a computer conferencing system in an R&D lab was significantly shaped by a set of intervening actors--mediators--who actively guided and manipulated the technology and its use over time. These mediators adapted the technology to its initial context and shaped user interaction with it; over time, they continued to modify the technology and influence use patterns to respond to changing circumstances. We argue that well-managed mediation may be a useful mechanism for shaping technologies to evolving contexts of use, and that it extends our understanding of the powerful role that intervenors can play in helping CSCW applications succeed.

No. 172

Computers and Economic Growth: Firm-Level Evidence.

Erik Brynjolfsson, Lorin Hitt

August 1994

In advanced economies, computers are a promising source of output growth. This paper assesses the value added by computer equipment and information systems labor by estimating several production functions that also include ordinary capital, ordinary labor and R&D capital. Our study employs recent firm-level data for 367 large firms which generated approximately $1.8 trillion dollars in output per year for the period 1988 to 1992.

We find evidence that computers are correlated with significantly higher output at the firm level, although simulataneity makes it difficult to prove a casual relationship. Considering the rapid growth in the sample period than all other types of capital combined, despite the fact that they accounted for less than 2% of the total capital stock.

No. 173

Information Technology as a Factor of Production: The Role of Differences Among Firms.

Erik Brynjolfsson, Lorin Hitt

August 1994

Despite evidence that information technology (IT) has recently become a productive investment for a large cross-section of firms, a number of questions remain. Some of these issues can be addressed by extending the basic production function approach that was applied in earlier work. Specifically, in this short paper we 1) control for individual firm differences in productivity by employing a "firm effects" specification, 2) consider the more flexible translog specification instead of only the Cobb-Douglas specification, and 3) allow all parameters to vary between various subsectors of the economy.

We find that while "firm effects" may account for as much as half of the productivity benefits imputed to IT in earlier studies, the elasticity of IT remains positive and statistically significant. We also find that the estimates of IT elasticity and marginal product are little-changed when the less restrictive translog production function is employed. Finally, we find only limited evidence of differences in IT's marginal product between manufacturing and services and between the "measurable" and "unmeasurable" sectors of the economy. Surprisingly, we find that the marginal product of IT is at least as high in firms that did not grow during 1988-1992 sample period as it is in firms that grew.

No. 174

A Taxonomy of Organizational Dependencies and Coordination Mechanisms.

Kevin Crowston

August 1994

Interdependency and coordination have been perennial topics in organization studies. The two are related because coordination is seen as a response to problems caused by dependencies. Past studies, however, describe dependencies and coordination mechanisms only in general terms, without characterizing in detail difference between dependencies, the problems dependencies create or how the proposed coordination mechanisms address those problems. This vagueness makes it difficult or impossible to determine what alternative coordination mechanisms might be useful in a given circumstance or to directly translate these alternative designs into specifications of individual activities.

In this paper I develop a taxonomy of dependency types by considering possible combinations of activities using resources. The taxonomy includes task-resource dependencies and three types of task-task dependencies: shared resources, producer-consumer and common output. For each type of dependency, alternative coordination mechanisms are described. I conclude by discussing how the taxonomy helps to analyze organizational processes and suggest alternative processes.

No. 175

Electronic communication and new organizational forms: A coordination theory approach.

Kevin Crowston

August 1994

Describing and categorizing organizational forms remains a central problem in organization theory. Unfortunately defining organizational form poses numerous difficulties. Rather than attempting to categorize entire organizations, researchers have instead suggested focusing on how particular tasks are performed, i.e., adopting the process as the unit of analysis. An important practical problem then is to identify processes that would be suitable for performing a desired task, especially processes that are enabled by the use of new electronic media and other forms of information technology. Coordination theory provides an approach to the study of processes. In this view, the form a process takes depends on the coordination mechanisms chosen to manage dependences among tasks and resources involved in the process. These mechanisms are primarily information-processing and so the use of new media will particularly affect their cost, perhaps changing which are preferred.

In this paper, I use coordination theory to analyze the software change process of a large mini-computer manufacturer and suggest alternative ways the dependences involved could be managed and thus alternative forms the process could take. Mechanisms analyzed include those for task assignment, resource sharing and managing dependences between modules of code. The organization studied assigned problem reports to engineers based on the module which appeared to be in error; engineers specialized in particular modules. The framework suggests alternative mechanisms including assignment to generalists based on workload or based on market-like bids. Modules of code were not shared, but rather "owned" by one engineer, thus reducing the need for coordination; a more elaborate code management system would be required if multiple engineers needed to work on the same modules. Finally, engineers managed dependences between modules informally, based on their personal knowledge of which other engineers used their code; alternatives include formally defining the interfaces between modules and tracking their users.

Software bug fixing provides a microcosm of coordination problems and solutions. Similar coordination problems arise in most processes and are managed by a similar range of mechanisms. For example, diagnosing but reports and assigning them to engineers may have interesting parallels to diagnosing patients and assigning them to specialists.

While the case presented does not formally test coordination theory, it does illustrate the potential of the coordination theory for exploring the space of organizational forms. Future work includes developing more rigorous techniques for such analyses, applying the techniques to a broader range of processes, identifying additional coordination problems and mechanisms and developing tools for collecting and comparing processes and perhaps automatically suggesting potential alternatives.

No. 176

Grammatical Models of Organizational Processes.

Brian T. Pentland

August 1994

Grammar has been used metaphorically to describe organizational processes, but the metaphor has never been systematically developed so that it can be applied in empirical research. This paper develops the grammatical metaphor into a rigorous model for describing and theorizing about organizational work processes, defined here as sequences of actions that occur in the context of enabling and constraining structures. A grammatical model starts with a lexicon of elementary actions (called moves) and specifies the ways in which they can be combined to create a process. Unlike other sequential data analysis techniques, grammatical models provide a natural way of describing the layering and nesting of actions that typifies organizational processes. The example of a simple retail sales transaction is used to illustrate the underlying concepts. The paper also examines some methodological considerations involved in using process grammars and proposes an agenda for research , including: (1) creating descriptive taxonomies of organizational processes; (2) creating disconfirmable theories about the relationship between processes and the structures that enable and constrain them; (3) explaining the distribution of observed processes and predicting new processes that have not yet been observed; and (4) designing new organizational processes.

KEYWORDS: Grammars; Process models; Business processes; Sequential analysis.

No. 177

Grammatical Model of Organizational Routines in a Technical Service Organization.

Brian T. Pentland

August 1994

This paper explores the sequential structure of work processes in a task unit whose work involves high numbers of exceptions, low analyzability of search, frequent interruptions and extensive deliberation, and cannot be characterized as routine under any traditional definition. Yet a detailed analysis of the sequential pattern of action in a sample of 168 service interactions reveals that most calls follow a repetitive, functionally similar pattern. This apparent contradiction presents a challenge to our theoretical understanding of routines: how can apparently non-routine work display such a high degree of regularity? To answer this questions, we propose a new definition of organizational routines as a set of functionally similar patterns and illustrate a new methodology for studying the sequential structure of work processes using rule-based grammatical models. This approach to organizational routines juxtaposes the structural features of the organization against the reflective agency of organizational members. Members enact specific performances form among a constrained (but potentially large) set of possibilities that can be described by a grammar, giving rise to the regular patterns of action we label routines.

No. 178

Process Grammars: A Generative Approach to Process Redesign.

Brian T. Pentland

August 1994

Organizations are under increasing pressure to redesign core organizational processes. This paper describes the ways in which the Process Handbook (Malone, Crowston, Lee, and Pentland, 1993) can be used to describe and redesign business processes. The Process Handbook is an electronic database of process descriptions and analysis tools. When completed, it will embody a large lexicon of process steps and constraints on the ways in which they can be combined. The Process Handbook can therefore be viewed as a kind of grammar for generating alternative process configurations. The example of a supply chain is used to illustrate the concepts.


Roles for Electronic Brokers

Paul Resnick, Richard Zeckhauser and Chris Avery

The information superhighway directly connects millions of people, each both a consumer of information and a potential provider. If their exchanges are to be efficient, yet protected on matters of privacy, sophisticated mediators will be required. Electronic brokers can play this important role by organizing markets that promote the efficient production and consumption of information. One possible role for brokers would be to collect and redistribute product evaluations. We discuss issues of privacy, censorship, and incentives for participation that would arise in such a shared evaluation service. We then argue for the separation of the services of information provision and brokerage.

No. 180

The PIF Process Interchange Format and Framework

Jintae Lee, Gregg Yost and the PIF Working Group

December 1994

This document describes the first version of the Process Interchange Format (PIF, version 1.0). The goal of this work is to develop an interchange format to help automatically exchange process descriptions among a wide variety of business process modeling and support systems such as: workflow software, flow charting tools, process simulation systems, and process repositories.

Instead of having to write ad hoc translators for each pair of such systems, each system will only need to have a single translator for converting process descriptions in that system into and out of the common PIF format. Then any system will be able to automatically exchange basic process descriptions with any other system.

The current PIF format includes a core set of object types (such as activities, actors, and prerequisite relations) that can be used to describe the basic elements of any process. The PIF format also includes a framework for extending the core set of object types to include additional information needed in specific applications. These extended descriptions are exchanged in such a way that the common elements are interpretable by any PIF translator and the additional elements are interpretable by any translator that knows about the extensions.

The PIF format was developed by a working group including representatives from several universities and companies and has been used for experimental automatic translations among systems developed independently at three of these sites.

This document is being distributed in the hopes that other groups will comment upon the interchange format proposed here and that this format (or future versions of it) may be useful to other groups as well.

No. 181

Experiments with Oval: A Radically Tailorable Tool for Cooperative Work

Thomas W. Malone, Kum-Yew Lai, and Christopher Fry

December 1994

This paper describes a series of tests of the generality of a "radically tailorable" tool for cooperative work. Users of this system can create applications by combining and modifying four kinds of building blocks: objects, views, agents, and links. We found that user-level tailoring of these primitives can provide most of the functionality found in well-known cooperative work systems such as gIBIS, Coordinator, Lotus Notes, and Information Lens. These primitives, therefore, appear to provide an elementary "tailoring language" out of which a wide variety of integrated information management and collaboration applications can be constructed by end users.

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