The influence of information technology on organizational structure in SMEs

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Information Technology (IT) started as a ‘nice to have’ for organizations but quickly evolved to a ‘need to have’. An organization without IT seems unthinkable in this era. In previous literature it has been shown that technology and organizational structure are related to each other. The purpose of this study was to gain insight into what effect IT can have on organizational structure in small and medium sized enterprises (SMEs) in order to gain new theoretical insights. This explorative study focuses on the effects IT can have on three elements of organizational structure: decentralization, formalization and specialization. This research used a qualitative approach and looked at two steel manufacturing SMEs. The results of this research suggest that IT can influence structural characteristics. Interestingly, centralization seems to be a double-edged sword, meaning IT can both increase and decrease centralization in organizations. It seems that IT increases centralization in operating routines but can lead to decentralization in improvement routines. The increase of centralization in operating routines can be explained by the fact that information of the primary process can be easily collected and analyzed from a more central, broader perspective. The decentralization of improvement routines seems to be related to the fact that there is more time on the operational floor to work on improvement projects since IT takes over the coordination of the operational floor. It seems that IT can increase formalization, since it makes it easier to communicate the right information to the right person. In addition, data from the operational floor can be communicated back to management, which can lead to improved work instructions and procedures. It is not clear how IT can influence the specialization of an organization. This study shows how IT can influence the organizational structure and makes it clear that IT in an organization can lead to organizational change and therefore adds initial support to the literature.
Faculteit der Managementwetenschappen