Evaluating the Economic Implications of Information Systems: A Formal Model of Information Processing Capacity

Abstract: The choice of the pattern for cooperation is a traditional issue of the organizational debate on business process design, which typically compares alternative cooperation patters on the basis of cost variables. From an engineering perspective, costs should be contrasted against production capacity as a primary indicator of performance. This paper takes this perspective and proposes a formal model of information processing capacity to evaluate alternative cooperation patterns. Simulation results show how a capacity perspective delivers significantly different results from the cost-oriented organizational view. Traditional design principles for the selection of the most efficient organizational structure (i.e. degree of process networking, specialization, delegation and information overflow) are significantly complemented.