Untitled - socium.ge

Why information should influence productivity 151Hamel, 1990; Barney, 1991; Kogut and Zander, 1992). When procedural informationis recognized within economics, it is most frequently modeled as accumulatingstocks of knowledge spillovers without processes for logicalinference. Examples include the endogenous growth theory literature ofmacroeconomics (Romer, 1986, 1990; Adams, 1990; Rivera-Batiz and Romer,1991; Aghion and Howitt, 1998) and the industrial organization literature(Griliches, 1986; Pakes, 1986).In terms of our recruiting example, computerization of the executive searchindustry has dramatically increased not only the searchable resumés on file –the facts – but also the methods for finding candidates and sharing knowledgeabout them – the processes. Each improves output in a distinct fashion, one byimproving the quality of a match, the other by matching with less effort. If thegoal is to tie information, its flows, its value, and its navigation to productivity,then we need models of how it changes both quality of output and also theinput/output ratio.These perspectives can be visualized using an idea from the economictheory of production, in which a firm transforms inputs into outputs using themost efficient means at its disposal. In its most abstract form, this is representedby an efficient frontier – a production function boundary equatingcombinations of inputs that produce the same level of output (figure 6.1).Substituting inputs at efficient marginal rates only moves points along thefrontier.If risk and uncertainty lead to poorer decisions and hedging bets, thenproduction lies away from the optimum. News and facts that reduce uncertaintymove the firm toward increased efficiency. The best outcomes areincreasingly achieved as present and future conditions are known with increasingcertainty (figure 6.2a). Consider hiring recruiters in one period for uncertainprojects in the next. With too few projects, excess labor hours are wasted.With too few recruiters, projects are dropped and recruiters spread thin. Newsthat reduces inefficiency moves a firm to the frontier.While the economic view of production is coarse grain – a black box transformsinputs to outputs – the computational view is finer grain – modularroutines can be rearranged to rearrange results. If rearranging resourcescreates a new result or uncovers an unknown cost reduction, then technologicalpossibilities change. As more real value output results from an equivalentamount of real value input, it corresponds to the neoclassical definition of aproductivity increase: an outward shift of the efficient frontier (figure 6.2b).Across different recruiters, we found limited evidence of IT increasing thecapacity to multitask projects and therefore carry a greater load. Multitaskingis strongly associated with increased output. If process knowledge of how toeffectively use IT changes the ability to multitask, it could change the productionfrontier.