Technology changes the way companies do business

In the fast-paced world of modern business, technology plays an important role in shaping how companies operate. One area where this impact is particularly strong is the organization of production chains, especially how goods are manufactured and distributed.

A new study from the Cornell SC Johnson College of Business deepens our understanding of the evolution of U.S. production chains amid technological advances in information technology (IT) and reveals the complex relationship between business IT investments and organizational design. I am.

Advances in IT are causing major changes in the way companies design their production processes. Paper published on April 30th, “Production Chain Organization in the Digital Age: Information Technology Use and Vertical Integration in U.S. Manufacturing” Business AdministrationChris Forman, Professor Peter Nolan and Stephanie Nolan Professor at the Dyson School of Applied Economics and Management, and his co-authors delved into what these changes mean for businesses and consumers.

An important decision when running a manufacturing plant is how much of the production process to handle in-house and how much to outsource to other companies. This decision, known as vertical integration, can have a significant impact on your business. Advances in information and communication technology brought about by the Internet have changed the network of production flows for many companies.

Forman and Christina McElheran, an assistant professor of strategic management at the University of Toronto, analyzed U.S. Census Bureau data from more than 5,600 manufacturing plants to determine how companies' production chains have been affected by the Internet revolution. . By using census data, they are able to internally examine the relationships between production units within and between companies, and after companies invest in Internet-enabled technology that facilitates coordination between companies, they can We were able to examine how the flow changed.

Many of the companies studied sell their production units simultaneously to internal and external customers, a combination they refer to as multiple sales. They found that the reduction in communication costs made possible by the Internet led to either an increase in external sales or a shift toward a decrease in vertical integration.

“Thanks to the Internet, it's cheaper and faster for businesses to communicate with each other and share information. This means businesses can work together more efficiently, without the need for as much vertical integration. “I do,” Forman said.

While some may worry that relying on external partners will make their business more vulnerable, research suggests this is not the case. In fact, companies that already adopted a multiple governance approach before the Internet era seem to be the most adaptable to these changes. Capacity-constrained production sectors were also among the sectors that experienced the most significant changes in trade flows following investments in new technology.

“Technology continues to reshape the way companies operate and organize,” Forman said. “Recently, changes in the use of analytics in enterprises have been accompanied by organizational changes, and it is very likely that the same is going on with new investments in artificial intelligence.”

This study highlights the importance of staying on the cutting edge of technology. Companies that implement digital technology today are likely to succeed in the future. While many unanswered questions remain about how these changes will play out, one thing is clear: the relationship between technology and business will become increasingly intertwined.