accounting information systems and organization learning: a simulation

8/11/2019 ACCOUNTING INFORMATION SYSTEMS AND ORGANIZATION LEARNING: A SIMULATION

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P e r g a m o n

Accting., Mgm t. & In fo. Tech., Vol. 7, No. 1, pp. 1-19, 1997

1997 Elsevier Science Ltd. All r ights reserved

Printed in Great Britain

0959-8022/97 17.00 + 0.00

P l h S 0 9 5 9 - 8 0 2 2 9 7 ) 0 0 0 0 1 - 5

A C C O U N T I N G I N F O R M A T I O N S Y S T E M S A N D

O R G A N I Z A T I O N L E A R N I N G : A S I M U L A T I O N

A r i s M . O u k s e l

University o f Illinois at hicago

K e n M i h a v i c s

Roosevelt University

P e t e r C h a l o s

University o f Illinois at hica go and ity University of Hong Kong

A b s t r a c t - - A c c o u n t i n g I n f o r m a t i o n S y s t e m s m a y f a c i li t at e o r i m p e d e o r g a n i za t i o n a l l e a r n in g . C r i ti c a l

a t t ri b u t e s o f a c c o u n t i n g s y s t e m s th a t h a v e t h e p o t e n ti a l t o a f f e ct o r g a n i z a t io n a l l e a r n i n g i n c l u d e : ( 1 )

c h a r a c t e r is t i c s o f t h e i n f o r m a t i o n e n v i r o n m e n t , w h e t h e r u n i f o r m , d i s p e r s e d o r c l u s t e r e d i m p o r t a n c e w e i g h t s ;

( 2 ) i n f o r m a t i o n d i s t ri b u t io n , w h e t h e r o v e r l a p p i n g o r s e g r e g a t e d i n f o r m a t i o n ; a n d ( 3 ) i n f o r m a t i o n c o o r d i n a t i o n

m e c h a n i s m s , w h e t h e r e x p e r t t e a m s , m a j o r i t y v o t i n g t e a m s o r h i e r a r c h ie s . O r g a n i z a t io n a l l e a r n i n g a n d

p e r f o r m a n c e w a s s i m u l a t e d i n th e f o l l o w i n g m a n n e r : ( i) t h e o r g a n i z a ti o n w a s f a c e d w i t h a c o n t i n u o u s s e q u e n c e

of r epe t i t i ve bu t no t i den t i ca l p rob l em s ; ( ii ) the o rgan i za t i ona l t a sk wa s sub d i v i ded be t ween ana l ys t s ; and ( ii i)

a n a l y s t s l e a rn e d b y b a s i n g t h e i r d e c i s i o n s o n t h e r e l a t i o n s h i p f o u n d b e t w e e n i n f o r m a t i o n a v a i l a b l e t o t h e m a n d

o r g a n i z a t io n a l o u t c o m e s . S i m u l a t i o n r e s u l t s i n d i c a te d t h a t l e a r n i n g i n f l at t er ( t e a m ) o r g a n i z a t i o n s i s g e n e r a l l y

m o r e a c c u r a t e t h a n i n h i e r a rc h i c a l o r g a n i z a t i o n s . L e a r n i n g i s a l s o f a s t e r w i th m a j o r i t y t e a m s t h a n h i e r a r c h ie s ,

b u t s l o w e r w i t h e x p e r t t e a m s . O v e r l a p p i n g a c c o u n t i n g in f o r m a t i o n t r a n s m i s s i o n b e t w e e n a g e n t s w a s f o u n d t o

o f f e r o n l y l i m i t e d b e n e f it s . T h e s e f i n d i n g s h a v e i m p l i c a t io n s f o r t h e d e s i g n o f a c c o u n t i n g i n f o r m a t i o n s y s t e m s

i n o rgan i za t i ons . 1997 E l sev i e r S c i ence L t d

I N T R O D U C T I O N

A cco u n t in g In fo rmat io n S y s tems (A . I .S . ) p l ay a cen t ra l ro l e in o rg an iza t io n a l l ea rn in g ,

p ro mp t in g c l a ims th a t t h e a im o f th e d es ig n o f A . I .S . i s q u it e s imp ly to imp ro v e o rg an iza tio n a l

learn ing (Em ma nuel , Ot le y & Merchan t , 1990 , p . 371) and to act ivate learn ing and

exp er im enta t ion (Senge, 1990 , p . 253) . Ou r in terp reta t ion o f f i rm learn ing bu i lds on th ree

class ical observa t ions o f behav ior (Lev i t t & March , 1995) . Th e f i rs t i s that a g reat deal o f

o rgan izat ional learn ing is based on rou t ines (Cyer t & March , 1963 ; Nelson & Win ter , 1982)

w h ich a re en v i ro n m en ta l ly co n d i t io n ed (F io l & L y les , 1 98 5) . T h e seco n d o b se rv a t io n i s th a t

o rg an iza t io n s a re g o a l o r i en ta t ed . T h e i r b eh av io r d ep en d s o n th e r e l a t io n sh ip b e tw een t a rg e ted

and ach ieved ou tcomes. The th i rd observat ion is that o rgan izat ional ac t ions are h is to r ical .

O u tp u t g o a l s a re t emp ere d b y in t e rp re t a t io n s o f th e p as t , a s o rg an iza t io n s ad ap t in c rem en ta l ly

an d l ea rn f ro m g o a l a t t a in men t in r e sp o n se to f eed b ack ab o u t o u tco mes (D en H er to g &

W iel inga, 1992). Th e empha sis on rou t ines and the eco logy o f learn ing d is t ingu ishes th is


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2 A.M. OUKSEL

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ap p ro ach f ro m a l t e rn a t iv e th eo ri e s an d c lo se ly r e semb les p a rad ig m s o f i n d iv id u a l l ea rn in g fo u n d

in the acco un t ing l i tera tu re (H am mo nd D ea ne , 1973 ; Harre l l , 1977).

A n in t e rac tiv e l ea rn in g p ro cess o f p e r io d ic p l ann in g , measu remen t , f eed b ack an d p e r fo rm-

ance appraisa l characte r izes man y A.I .S . : (1 ) goals are determ ined ; (2 ) env i ro nm ental

in fo rmat io n i s co d ed , s to red an d su b seq u en t ly r e t r iev ed ; (3 ) d ev ia t io n s o f ac tu a l o u tco m es f ro m

p red e te rm in ed g o a l s a re r eco rd e d fo r fu tu re co r rec t iv e ac t io n ; an d (4 ) g o a l a t t a in men t i s

rew arded (F lamhol tz , Das Tsu i , 1985 , p . 39). Re cen t ev ide nce f rom the acco un t ing l i tera tu re

su p p o r ts t h i s v i ew o f o rg an iza t io n a l l ea rn in g . T h e m o s t co m m o n ly c i t ed ap p l i ca tio n s in c lu d e

p ro jec t man ag emen t r ep o r t s su ch as p a th an a ly s i s fo r p ro d u c t io n sch ed u l in g ; p ro f i t p l an n in g

sy s t ems fo r li n es o f b u s in ess w h ich r ep o r t ac tu a l t o fo recas t r ev en u e an d ex p en se co m p ar i so n s ;

r ev en u e b u d g e t s w h ich an a ly ze mark e t sh a re , v o lu me , p r i ce , e t c . ; r ep o r t s u sed to mo n i to r

compet i t ion ; and human resource p lann ing budgets (S imons, 1995 , p . 108) .

A n u mb er o f f ac to r s a re c r i t i ca l i n A . I .S . d es ig n . O rg an iza t io n a l memo ry , w h e th e r t ac i t o r

fo rmal i zed , may b e sy s t emat i ca l ly co d ed b u t i n fo rmat io n may n o t a lw ay s b e r ea d i ly av a il ab le .

O rg an iza t io n s v a ry in th e emp h as i s t h ey p l ace o n fo rmal ro u t in es . G o a l s an d f eed b ack , b y

d ef in i t i o n , a re s t ro n g ly co n d i t io n ed b y th e en v i ro n men t in w h ich th e f i rm o p era t es . F i rms

o p era t in g in u n ce r t a in en v i ro n m en t s f ace ch a l l en g es in imp lem en t in g A . I .S . d es ig n ed to p ro mo te

rou t in ized o rgan izat ional learn ing . As env ironmental uncer ta in ty increases , o rgan izat ions need

to adap t thei r A.I .S . in o rder to p rom ote learn ing (O uch i , 1977).

T h e imp ac t o f o rg an iza t io n a l co mp lex i ty o n l ea rn in g i s a l so c r i t i ca l i n A . I .S . d es ig n

(Galbrai th , 1977 ; W eick Rober ts , 1993). Orga n izat ional h ierarch ies and mu l t i -d iv is ional

r esp o n s ib i l i t y cen t r es sh ap e in fo rmat io n ro u t in es . T h e co mp lex i ty o f o rg an iza t io n a l d es ig n

u su a l ly p rec lu d es co m p le t e d i s sem in a t io n o f acco u n t in g in fo rmat io n to a l l d iv is io n a l su b -u ni ts .

T y p ica l ly , i n fo rmat io n i s ag g reg a ted o r co m p ressed as i t f l o w s v e r t i ca lly u p th e o rg an iza t io n a l

h ierarchy . Latera l ly , in fo rma t ion is o f ten se le ct ively d is t ribu ted across sub-un i ts . Th e eco log ical

s t ructu re o f the o rgan izat ion com pl icates m odel ing o f the learn ing p rocess . Se nge (1990 , p . 289)

a rg u es th a t h i e ra rch ies o f t en imp ed e o rg an iza t io n a l l ea rn in g , w h i l e t eams mo re e f f ec t iv e ly

promote learn ing . Recen t in i t ia t ives to f la t ten o rgan izat ional s t ructu res , es tab l ish cross-

fu n c t io n a l teams , an d in c rease e l ec t ro n ic in fo rmat io n sh a r in g a re in p a r t mo t iv a t ed b y a d es i r e

to improve o rgan izat ional learn ing .

In th is s tudy , we rep l ica te and ex tend p rev ious computat ional o rgan izat ion theory research

(Car ley , 1992) wi th in an A.I .S . f ramework . Speci f ica l ly , we measure p rev iously unexamined

ef fec t s o f en v i ro n men ta l i n fo rmat io n ch a rac t e r i s t i c s o n t eam an d h ie ra rch ica l i n fo rmat io n

p ro cess in g ac ro ss seg reg a ted an d o v er l ap p in g A . I .S . O u tco m e e f fec t iv en ess is m easu red in t e rms

of bo th accuracy and speed o f o rgan izat ional learn ing . As th is i s ex t remely d i f f icu l t , i f no t

impossib le , to cap tu re in an o rgan izat ional se t t ing , a s imu lat ion i s used . W hi le the s imu lated task

i s ad mi t t ed ly s ty l i zed , t h e me th o d o lo g y l ay s th e g ro u n d w o rk fo r a se t o f emp i r i ca l ly t e s t ab le

p ro p o s i ti o n s fo r fu tu re ex p er imen ta l an d f i e ld r e sea rch .

T H E O R E T I C A L D E V E L O P M E N T

O r g a n i z a t i o n a l l e a r n i n g

Curre n t l i tera tu re on o rgan izat ional learn ing tends to be theoret ica l ly f ragm ented , d rawing on

analog ies o f ind iv idual learn ing o r s imply us ing o rgan iza t ional learn ing as an exp la nat ion fo r

man y d i f f e ren t k in d s o f o b se rv ed o rg an iza t io n a l ch an g e o r ad ap ta t io n (A rg o te , B eck man

Epple , 1990; Car ley , 1992 ; F io l Ly les , 1985 ; Lev i t t M arch , 1988) . Som e au thors (Argyr is

Schon , 1978 ; M arch Olson , 1976) deal exp l ic i t ly wi th ind iv idual learn ing , whi le o thers


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ACCOUNTING INFORMATIONSYSTEMS AND ORGANIZATIONLEARNING 3

( L a n t & M e z i a s , 1 99 2) p r o p o s e a l e a rn i n g m o d e l w h i c h a c c o u n t s f o r p a t te r n s o f c h a n g e s a t t h e

l e v e l o f t h e o r g a n iz a t i o n . Ar g y r i s a n d S c h o n ( 1 9 7 8 ) d i s t in g u i s h b e t w e e n s i n g l e- a n d d o u b l e - l o o p

l e a r n i n g . T h i s d i s t i n c t i o n c a n b e t h o u g h t o f i n t e r ms o f o p e r a t i o n a l ( k n o w- h o w) a n d s t r a t e g i c

( k n o w - wh a t ) l e a rn i n g . S i n g l e - l o o p l e a r n in g o c c u r s a t t h e o p e r a t i o n a l l e v e l b e c a u s e i t c o n c e r n s

processes , wh i le doub le - loop l ea rn ing occurs a t the s t r a teg ic l eve l because i t conce rns the

def in i t ion o f goa l s .

T h e e f f e c t o f i n d i v i d u a l l e a r n i n g o n o r g a n i z a t i o n a l l e a r n i n g c a n b e s e e n b y a n a l y z i n g t h e

i mp a c t o f p e r s i s t e n c e o f s h a r e d mo d e l s o n t h e p e r f o r ma n c e o f o r g a n i z a t i o n s . O t h e r s e mp h a s i z e

the impor tance o f ind iv idua l l ea rn ing on ly in so fa r a s pe r sona l sk i l l s , in s igh t s and knowledge

b e c o m e e m b o d i e d i n o r g a n i z a t io n a l l e a r n i n g r o u ti n e s , p r a c ti c e s , a n d b e l i e f s t h a t o u tl a s t t h e

p r e s e n c e o f th e o r ig i n a l i n d i v id u a l ( A t t e we l l, 1 99 2). T h i s p e r s i s t e n c e o f c o n c e p t u a l k n o w l e d g e

i s cons i s t en t wi th the no t ion o f o rgan iza t iona l l ea rn ing adop ted in th i s paper , name ly the

e n c o d i n g o f in f e r e n c e s f r o m h i s to r y i n to r o u t in e s t h a t g u i d e f u t u re b e h a v i o r ( L e v i t t & M a r c h ,

1988).

Or g a n i z a t i o n a l l e a r n i n g h o w e v e r i s mo r e t h a n t h e s u m o f i n d i v id u a l l e a r n i n g o f c o n s t i tu e n t

m e m b e r s . R a t h e r , i t is t h e a b i li ty t o s t o r e d a t a ( in s o m e t y p e o f me m o r y ) , t o r e c o g n i z e p a t t e r n s

and ru les f rom th i s da ta , and to bu i ld sha red men ta l mode l s ac ross ind iv idua l s and d iv i s ions o f

an o rgan iza t ion . A . I .S . p lay a c r i ti ca l ro le in shap in g these rou t ines . The no t ion o f sha red me n ta l

mo d e l s i s ce n t r a l to w o r k o n c o n t i n u o u s o r g a n i z a t io n a l i m p r o v e m e n t ( S e n g e , 1 99 0) .

Or g a n i z a t i o n a l l e a r n in g i n th i s c a s e i s v i e we d a s i m p r o v i n g a c ti o n s th r o u g h b e t t e r k n o w l e d g e

and und ers tand ing (F io l & Ly les , 1985) o r a s inc reas ing an o rga n iza t io n ' s capa c i ty to t ake

e f fec t ive ac t ions (Kim , 1993) by us ing d i scov ered pa t te rns and ru les to gu ide fu tu re dec i s ion

making . Th i s r equ i res cons tan t moni to r ing o f in fo rmat ion a t the ind iv idua l a s we l l a s a t the

organ iza t iona l l eve l , a ro le fo r which A. I .S . a re idea l ly su i t ed .

E n v i r o n m e n t a l u n c e r t a i n ~ a n d A . I. S . c o o r d in a t i o n

T h e e n v i r o n me n t f a c i n g t h e f i r m h a s b e e n s h o wn t o h a v e a s i g n i f i c a n t i mp a c t o n A . I . S .

d e s ig n . K h a n d w a l l a ( 1 9 7 2 ) wa s o n e o f th e f ir s t r e s e a r c h e r s to e mp h a s i z e t h e i mp o r t a n c e o f

e n v i r o n m e n t a l c o mp e t i t i o n o n th e f i r m ' s i n fo r ma t i o n s y s t e m. A s i m i l a r c o n c l u s i o n w a s r e a c h e d

b y Ot l e y ( 1 9 8 0 ) wh o d e t e r mi n e d t h a t b u d g e t a r y s y s t e ms we r e s t r o n g l y i n f l u e n c e d b y t h e f i r m ' s

e n v i r o n m e n t . G o r d o n a n d Mi l l e r ( 1 9 7 6 ) f o u n d t h a t h e t e r o g e n e i t y o f p r o d u c t l i n es wa s a p r i m a r y

d e t e r m i n a n t o f A . I . S . r e p o r t in g f r e q u e n c y a n d s o p h i s ti c a ti o n . An o t h e r s tu d y , p e r ta i n i n g t o

e n v i r o n me n t a l u n c e r t a i n t y ( Go v i n d a r a j a n , 1 9 8 4 ) f o u n d n o c o n n e c t i o n b e t we e n b u d g e t a r y

a c c o u n t i n g s y s t e ms a n d o r g a n i z a t i o n a l l e a r n i n g e f f e c t i v e n e s s u n t i l t h e me d i a t i n g e f f e c t o f

u n c e r t a i n t y wa s c o n s i d e re d . T h i s c o n s i d e r a b l e b o d y o f w o r k r e l a ti n g e n v i r o n m e n t a l p r e d i c t a b il -

i t y t o A . I . S . h a s b e e n s u mma r i z e d i n s u c h wo r k s a s Ga l b r a i t h ( 1 9 7 7 ) , Mi n t z b e r g ( 1 9 7 9 ) a n d

P f e f f e r (1 9 8 2 ) b u t h a s y e t t o b e f u l ly i n c o r p o r a t e d in t o a c c o u n t in g s y s t e m s r e s e a r c h

( E m m a n u e l e t a l . 1990, p. 62).

E a r l y a n d Ho p wo o d ( 1 9 8 1 ) d i s t i n g u i s h e d e n v i r o n me n t a l u n c e r t a i n t y i n d i a g n o s t i c c a u s e -

e f fec t r e la t ionsh ips f rom uncer ta in ty in s t r a teg ic ob jec t ives . When ob jec t ives a re c lea r and

c a u s e - e f f e c t r e l a t i o n s h i p s a r e we l l u n d e r s t o o d , d e c i s i o n s a r e p r o g r a mma b l e . E x a mp l e s o f t h i s

mi g h t i n c l u d e a n o p t i mi z a t i o n f u n c t i o n wh e n c o n s t r a i n t s a r e k n o wn , o r a d i s c o u n t e d c a s h f l o w

a n a l y s i s u n d e r r e l a t i v e e n v i r o n me n t a l c e r t a i n t y . R a r e l y h o we v e r d o A . I . S . p r o v i d e p e r f e c t

d e c i s i o n p r e d i c t a b i l i t y . As t h e e n v i r o n me n t b e c o me s l e s s c e r t a i n , E a r l a n d Ho p wo o d ( 1 9 8 1 )

a r g u e t h a t t h e a c c o u n t i n g s y s t e m s e r v e s as a l e a r n in g ma c h i n e f r o m wh i c h p r o b a b i l is t i c

i n f e r e n c e s a r e ma d e b a s e d u p o n s y s t e m i n p u t s . T h i s wo u l d b e t h e c a s e f o r e x a mp l e wh e n

b u d g e t a r y r e v e n u e s a r e c o mp a r e d t o a c t u a l r e v e n u e s f o r a n e w p r o d u c t , o r wh e n a p o s t a u d i t o f

a n i n v e s t me n t i n a n u n c e r t a i n e n v i r o n me n t i s p e r f o r me d .


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This p robab i l i s t ic v iew of o rgan izat ional learn ing bears a s t r ik ing s imi lar i ty to ind iv idual

p ro b ab i l i ty l ea rn in g mo d e l s (H a mm o n d D ea n e , 1 9 7 3) . C o m p en sa to ry l i n ea r ad d i t iv e mo d e l s

measu re su b jec t l ea rn in g in t e rms o f en v i ro n men ta l p red ic t ab il i ty , co n s i s t en cy , an d match in g o f

su b jec t cu e w e ig h t s t o ac tu a l en v i ro n m en ta l w e ig h t s . F eed b ac k a l lo w s th e in d ivid u a l t o b e t t e r

match h i s /h e r d ec i s io n w e ig h t s t o eco lo g ica l ly v a l id en v i ro n men ta l w e ig h t s . In d iv id u a l s tu d ies

o f l ea rn in g in au d i tin g an d m an ag er i a l acco u n t in g en v i ro n men t s h av e fo u n d th a t cu e f eed b a ck

imp ro v es mu l t ip l e cu e p ro b ab i l i t y l ea rn in g an d th e ma tch in g o f su b jec t d ec i s io n w e ig h t s t o

env iro nm ental we igh ts (Ash ton Bro wn, 1980 ; Harre l l , 1977). S im i lar s tud ies have no t

h o w ev er b een p e r fo rm ed a t th e o rg an iza t io n a l l ev e l. O u r s tu d y m eth o d o lo g ica l ly b o r ro w s in

sp i r i t f rom ind iv idual learn ing exper iments in operat ional iz ing learn ing a t the o rgan izat ional

level .

C o n t in g en cy th eo r i s t s a rg u e th a t A . I .S . sh o u ld b e d es ig n ed to ma tch en v i ro n men ta l

u n ce r t a in ty (G o rd o n Mi l l e r, 1 97 6; G o v in d ara j an , 1 98 4) . L aw ren ce an d L o rsch (1 9 6 7 ) h av e

shown that env i ronmental uncer ta in ty af fects d iv is ional s t ructu re and the A.I .S . des ign used to

in tegrate these d iv is ions . Mul t i -d iv is ional o rgan izat ional s t ructu re recogn izes the un ique

en v i ro n men ta l u n ce r t a in ty f ac in g d i f f e ren t p ro d u c t mark e t en v i ro n men t s . U n d er su ch a

s t ru ctu re , it i s h ig h ly imp ro b ab le th a t t o p m an ag em en t p o ssesses th e b es t p red ic t iv e in fo rmat io n

mo d e l fo r each d iv i s io n a l en v i ro n men t . S u b -u n i t man ag er s n o t o n ly h av e a b e t t e r u n d er s tan d in g

of local env i ronments , bu t are a lso in a posi t ion to react more qu ick ly to th is in fo rmat ion .

H ie ra rch ica l i n fo rmat io n t r an smiss io n fu n c t io n s w e l l i n cen t r a l i zed an d r e l a t iv e ly p red ic t ab le

en v i ro n men t s . I t en co u rag es sp ec ia l i za t io n , imp ro v es mo n i to r in g an d r ed u ces u n ce r t a in ty

(Wi l l iamso n , 1 97 5) . H o w ev e r , v e r ti ca l i n fo rmat io n f lo w s a l so l ead to in fo rma t io n co mp ress io n

and t ime delays as in fo rmat ion t ravels up the h ierarchy . A.I .S . are o f ten des igned to aggregate

in fo rmat io n in su mmary r ep o r t s a t each h i e ra rch ica l l ev e l . F o r ex amp le , sa l e s g o a l s a re o f t en

determined a t the top level . These goals are then t rans la ted in to d iv is ional and p roduct l ine

prof i tab i l i ty ob ject ives . P roduct ion i s determined by p lan t operat ions and goals are se t fo r each

p lan t . Once sa les and p roduct ion occur , per iod ic d iv is ional p ro f i t and p lan t perfo rmance are

rep o r t ed to u p p er l ev e ls b u t d e t a i led p ro d u c t io n r ep o r t s an d mark e t in g v a r i an ces r emain a t l o w er

levels .

T h e o rg an iza t io n l ea rn s b y co mp ar in g r ep o r t ed r e su l t s t o b u d g e ted g o a l s a t each r ep o r t in g

level . Actual pe rfo rm anc e feedba ck is in i t ia l ly gathered a t the local level . Div is ional p rodu ct ion

and sa les repor ts are examp les o f such feedbac k . Per iod ical ly , A.I .S . i ssue sum ma ry f inancia l

con tro l repor ts . Examples include p roduct ion var iances fo r cos t cen ters and d iv is ional

co n t r ib u t io n marg in s fo r p ro f i t cen te rs . T h e o rg an iza t io n l ea rn s b y co m p ar in g r ep o r t ed r e su lt s t o

budgeted goals a t each repor t ing level . Th is ver t ica l cybernet ic loop const i tu tes o rgan izat ional

learn ing in i t s s imples t fo rm.

A cco u n t in g fo recas t e r ro r s o f i n d iv id u a l d ep ar tmen t s h o w ev er b eco me mag n i f i ed w h en

aggreg ated a t each success ive level (Ot ley Berry , 1979) . Galb rai th (1977) has suggested that

v e r t i ca l i n fo rmat io n d i s to r t io n b e r ed u ced b y imp ro v in g l a t e ra l co mmu n ica t io n th ro u g h t eam

p ro cesses an d m at r ix in fo rm at io n s tru c tu res . R ecen t t r en d s to w ard s c ro ss - fu n c t io n a l t eams an d

f l a t te r o rg an iza tio n a l s t ru c tu res ty p i fy th ese in fo rmat io n co m mu n ica t io n ch an g es . F l a t t e r A . I.S .

are rep lacing ver t ica l A.I .S . (Den Her tog W iel inga, 1992). Cross - funct ional team s that now

perfo rm prev iously d is t inct value act iv i t ies requ i re g reater la tera l in fo rmat ion f lows in o rder to

b e e f f ec t iv e . O u t so u rc in g an d e l ec t ro n ic d a t a in t e rch an g e b e tw een in t e rn a l an d ex te rn a l su b -

un i ts a lso demand greater hor izon ta l A.I .S .

The t rend towards f la t ter o rgan izat ional s t ructu res suggests that as less in fo rmat ion

co mp ress io n o ccu r s , o rg an iza t io n a l l ea rn in g w i l l imp ro v e . T h i s i g n o res , h o w e v er , en v i ro n men ta l

co n t in g en c ies f ac in g th e o rg an iza t io n . Wh en acco u n t in g in fo rmat io n i s v e ry d i f f e ren t i a t ed o r


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ACCOUNTING INFORMATIONSYSTEMS AND ORGAN IZATIONLEARNING 5

c lus te red ac ross sub-un i t s , l ea rn ing how to recogn ize and in teg ra te th i s d ive r se in fo rmat ion

b e c o m e s p r o b l e ma t i c . Ho r i z o n t a l i n f o r ma t i o n tr a n s m i s s i o n is m u c h m o r e v u l n e r a b l e th a n v e r t i c al

t r a n s mi s s i o n t o t h e d e g r e e o f l o c a l s u b - u n i t e x p e r t is e . T h e i m p a c t o f a s i n g le f r o n t l i n e a n a l y s t i s

n o t d i l u te d b y t h e f i lt e r in g a c t i o n o f l a y e r s i n th e h i e r a rc h y . Op e r a t i n g u n d e r m u c h n a r r o w e r s p a n s

of con t ro l , h ie ra rch ies hav e the po ten t i a l to r ecogn ize h igh ly d iagnos t i c sub-un i t in fo rm at ion to a

g r e a t e r d e g r e e t h a n f l a tt e r o r g a n iz a t i o n a l s t r u c tu r e s w i t h m u c h wi d e r s p a n s o f c o n t r o l.

H i e r a r c h i c a l i n f o r ma t i o n t r a n s mi s s i o n i n u n c e r t a i n e n v i r o n me n t s a l s o d i r e c t l y a f f e c t s t h e

s p e e d o f o r g a n i z a t i o n a l l e a r n i n g . I n f l a t o r g a n i z a t i o n s wi t h r e l a t i v e l y u n i f o r m s u b - u n i t

e n v i r o n me n t s , s i mp l e d e c i s i o n r u l e s a r e p r e s u ma b l y mu c h f a s t e r t h a n h i e r a r c h i c a l d e c i s i o n s .

W h i l e d e c i s i o n m o d e l s s u c h a s s i m p l e ma j o r i t y r u le o f s u b - u n i ts a r e s i mp l e a n d q u i c k , l e a r n i n g

h o w t o d i s t i n g u i s h wh e r e mo r e i mp o r t a n t s u b - u n i t i n f o r ma t i o n r e s i d e s i s mu c h mo r e

com pl ica ted . In such cases , unde r a f la t in fo rm at ion s t ruc tu re , the speed o f o rgan iza t ion a l

l ea rn ing wi l l dec rease in p ropor t ion to the number o f sub-un i t s . Wi th d i f fe ren t sub-un i t

in fo rm at ion , the wide r the span o f con t ro l , the s low er the o rgan iza t iona l l ea rn ing . A h ie ra rchy

wi t h m o r e l e v e l s , b u t p r o g r e s s i v e l y s m a l l e r s p a n s o f c o n t r o l a t e a c h l ev e l , s h o u l d l e ar n m o r e

qu ick ly a lbe i t , a s no ted , l e s s accura te ly in many cases .

Ou r s t u d y e x a m i n e d t h e r e l a t i v e s p e e d a n d e f f i c i e n c y o f o rg a n i z a t i o n a l l ea r n i n g u n d e r f l a t a n d

h ie ra rch ica l A. I .S . Wi th in the f l a t t e r o rgan iza t iona l s t ruc tu re , two dec i s ion ru les were employed ,

ma j o r i t y a n d e x p e r t t e a ms ( d e f i n e d l a t e r ) . T h e i n f o r ma t i o n s y s t e m wa s c o n d i t i o n e d b y i t s

e n v i r o n m e n t . T h r e e t y p e s o f p r o b a b il i s ti c i n f o r ma t i o n w e r e e x a mi n e d : u n i f o r m, d i s p e r s e d a n d

c l u s t e re d i n f o r ma t i o n w e i g h ts . I n t h e u n i f o r m c a s e , e a c h o r g a n i z a t i o n a l s u b - u n i t s i n f o r m a t i o n

h a d t h e s a me i mp o r t a n c e r e l a t i v e t o o v e r a l l p r o b l e m r e s o l u t i o n . I n t h e c l u s t e r e d c a s e ,

i n f o r ma t i o n v a r i e d i n i mp o r t a n c e a n d i n f o r m a t i o n b i ts o f s i mi l a r we i g h t s we r e g r o u p e d t o g e t h e r

b y s u b - u n i t. I n t h e d i s p e r s e d c a s e , i n f o r ma t i o n b i t s a l s o h a d v a r y i n g w e i g h t s o f i mp o r t a n c e b u t

we r e r a n d o ml y d i s t r i b u t e d a c r o s s s u b - u n i t s .

T h e s u c c e s s o r f ai l u re o f o r g a n i z a t io n a l l e a r n i n g wh e n c o m b i n i n g d i f fe r e n t i n f o r ma t i o n c u e s

t o d e t e r mi n e o r g a n i z a t i o n a l o u t c o me s d e p e n d s c r i t i c a l l y , a s a r g u e d , u p o n t h e c o o r d i n a t i o n o f

e n v i r o n me n t a l i n f o r ma t i o n a c r o s s s u b - u n i t s . Or g a n i z a t i o n a l l e a r n i n g u n d e r f l a t i n f o r ma t i o n

coord ina t ion was pos i t ed to d i f fe r s ign i f i can t ly f rom h ie ra rch ica l l ea rn ing as a func t ion o f the

e n v i r o n me n t . Wh i l e p r e v i o u s r e s e a r c h ( C a r l e y , 1 9 9 2 ) h a s e x a mi n e d a c c u r a c y a n d s p e e d o f

l e a r n in g u n d e r u n i f o r m b i n a r y b i t i n f o r ma t i o n , t h e e f f e c t o f c l u s t e r e d a n d d i s p e r s e d p r o b a b i l is t i c

e n v i r o n me n t a l i n f o r ma t i o n u p o n o r g a n i z a t i o n a l o u t c o me s h a s n o t b e e n e x a mi n e d . Ac c o r d i n g l y ,

t h e f o l l o wi n g g e n e r a l p r o p o s i t i o n s we r e e x a mi n e d :

Proposi t ion 1 :

L e a r n i n g i n f l a t o r g a n i z a t i o n s ( ma j o r i t y a n d e x p e r t t e a ms ) u n d e r

u n i f o r m a n d d i s p e r s e d i n f o r ma t i o n i s mo r e a c c u r a t e t h a n l e a r n i n g i n h i e r a r c h i c a l

o r g a n i z a t i o n s . Wi t h c l u s t e r e d i n f o r ma t i o n , o n l y e x p e r t t e r ms o u t p e r f o r m

hie ra rch ies .

Proposi t ion 2 : L e a r n i n g i n f l a t e x p e r t ( ma j o r i t y ) o r g a n i z a t i o n s u n d e r u n i f o r m a n d

d ispe r sed in fo rmat ion i s s lower ( f a s te r ) than h ie ra rch ies .

E n v i ro n m en ta l u n cer ta in ty a n d A L S d i s tr ib u tio n

I n f o r m a t i o n d i f f u s i o n i s l o w w h e n i t is a v a i l a b l e t o o n l y a s u b s e t o f o r g a n i z a t io n a l s u b - u n it s .

T h e wi d e r s p a n s o f c o n t r o l f o u n d i n f l a t o r g a n i z a t i o n s o f t e n r e q u i r e d b r o a d e r d i s s e mi n a t i o n o f

in fo rmat ion . In a d i s t r ibu ted t a sk , such as the one examined in th i s s tudy , sub-un i t s

i n d e p e n d e n t l y s o l v e c o mp o n e n t s o f a n o r g a n i z a t i o n a l p r o b l e m. E a c h u n i t ma n a g e r h a s l o c a l

i n f o r ma t i o n wh i c h ma y o r ma y n o t b e s h a r e d wi t h o t h e r ma n a g e r s . Or g a n i z a t i o n a l t a s k s wi t h

d i s t r i b u t e d A . I . S . a r e c o mmo n . P r o d u c t d e v e l o p me n t d e p e n d s o n l o c a l i z e d i n f o r ma t i o n f r o m


6/19

6 A.M . OUKSEL et al

ma r k e t i n g . D i v i s i o n a l I n c o me S t a t e me n t s r e p o r t s u b - u n i t p r o f i t a b i l i t y . D i v i s i o n a l c o s t

in fo rmat ion i s used in in te r -d iv i s iona l t r ans fe r p r i c ing nego t ia t ions . In such cases , loca l

a c c o u n t i n g i n f o r ma t i o n ma y o r ma y n o t b e s h a r e d a c r o s s s u b - u n i t s .

Ad v a n c e s i n i n f o r ma t i o n t e c h n o l o g y h a v e i mp r o v e d A . I . S . d i f f u s i o n i n s e v e r a l wa y s . F i r s t ,

t h e s e s y s t e ms h a v e t h e a b i l it y t o s imp l i f y c o m p l e x a c c o u n t i n g d a t a b y r e p o r t i n g c o m p r e h e n s i b l e

s u m m a r y i n f o r ma t i o n . T re n d s i n r e v e n u e d a t a, q u a l i ty r e p o r t s a n d n u mb e r o f n e w o r d e r s a r e

e x a m p l e s o f t h is t y p e o f i n f o rma t i o n . S e c o n d , t h e p r o l if e r a t io n o f n e t wo r k e d c o m p u t e r s a l l o ws

i n f o r ma t i o n t o b e s h a r e d e l e c t ro n i c a ll y . P r o f i t p l a n n i n g g o a l s c a n b e b r o a d l y d i s s e mi n a t e d . P o i n t

o f s a l e d a ta c o l l e c t i o n c a n b e t r a n s mi t t e d t o p r o d u c t io n , ma r k e t i n g a n d f i n a n c e i n r e a l t ime a b o u t

c u s t o m e r b u y i n g p a tt e rn s . T h i rd , d a t a b a s e m a n a g e m e n t a ll o ws ma n a g e r s t o a s k wh a t i f

q u e s t io n s a b o u t a l t e r n a t iv e s c e n a r i o s s u c h a s i n v e s t me n t s o r p r i c in g . A l l o f t h is p e r m i t s mo r e

r e l e v a n t a n d t i me l y d a t a t o b e t r a n s mi t t e d a b o u t t h e f i r m ' s e n v i r o n me n t .

Or g a n i z a t i o n s i n c r e a s i n g l y r e c o g n i z e t h e v a l u e o f c r o s s - f u n c t i o n a l i n f o r ma t i o n s h a r i n g

n e t wo r k s . L a t e r a l i n f o r ma t i o n f l o w h a s i n c r e a s e d wi t h t h e a d v e n t o f r e c e n t s o f t wa r e i n f o r ma t i o n

p a c k a g e s s u c h a s L o t u s No t e s ; b y t h e f o r ma t i o n o f c r o s s - f u n c t i o n a l t e a ms ; a n d b y t h e wi d e r

spans o f con t ro l found in f l a t o rgan iza t ions . Th ese l a t e ra l ne tw orks de f ine the d i s t r ibu t ion o f

i n f o r ma t i o n i n t e r ms o f n u mb e r o f n o d e s o r l i n k s . Us i n g n e t wo r k a n a l y s i s , s h a r e d a c c o u n t i n g

i n f o r ma t i o n h a s b e e n f o u n d t o a mp l i f y a s we l l a s mi n i mi z e e r r o r s i n i n d i v i d u a l u n i t s ( Mo n g e ,

1987) . As managers ga in access to more in fo rmat ion , theore t i ca l ly g rea te r o rgan iza t iona l

l e a r n i n g i s p o s s i b l e , d e p e n d i n g o n t h e v a l u e o f s h a r e d i n f o r ma t i o n . S h a r i n g i n f o r ma t i o n o f

d i a g n o s t i c i mp o r t a n c e s h o u l d c l e a r l y b e mo r e u s e f u l t h a n s h a r i n g r e d u n d a n t i n f o r ma t i o n o r

i n f o r ma t i o n o f l o w r e l e v a n c e . Vu l n e r a b i l i t y t o l o c a l o p t i ma i s d e c r e a s e d a n d o u t c o me s h a v e

been found to improve (Hutch ins , 1990) .

In the ex t reme , a l l un i t s may sha re a l l in fo rmat ion . In such cases , in fo rmat ion d i f fus ion i s

comple te and redundan t . P rac t i ca l cons ide ra t ions , however , l imi t in fo rmat ion d i s t r ibu t ion .

Coord ina t ion cos t s a r i se and t ime de lays occur a s ne twork nodes inc rease (Malone , 1987) .

I n f o r ma t i o n r e v e l a t i o n b e t we e n u n i t s ma y b e s u b j e c t t o mi s r e p r e s e n t a t i o n . C o g n i t i v e l y , t h e

ab i l i ty o f ind iv idua l s to p rocess l a rge amounts o f in fo rmat ion and to in teg ra te th i s in fo rmat ion

i s l i mi t e d . De c i s i o n ma k e r s s u f f e r f r o m i n f o r ma t i o n o v e r l o a d a s t h e a mo u n t a n d c o mp l e x i t y o f

in fo rmat ion inc reases . Lea rn ing t ime a l so inc reases . Whi le A. I .S . shou ld be des igned to ac t iva te

lea rn ing , in fo rmat ion over load may l imi t the o rgan iza t ion ' s ab i l i ty to focus a t t en t ion . We

specu la te tha t o rgan iza t iona l l ea rn ing d i f fe r s s ign i f i can t ly be tween sha red and segrega ted A. I .S .

a s a f u n c ti o n o f t h e e n v i r o n me n t . T h e f o l l o wi n g g e n e r a l p r o p o s i t i o n s we r e e x a m i n e d :

P r o p o s i t i o n 3 :

Or g a n i z a t i o n a l l e a r n in g u n d e r o v e r l a p p i n g A . I .S . i s mo r e a c c u r a t e

than l ea rn ing under se grega te d A. I .S . w i th c lus te red in fo rma t ion , bu t the re is no

d i f f e r e n c e u n d e r u n i f o r m o r d i s p e r s e d i n f o r ma t i o n c o n d i t i o n s .

P r o p o s i t i o n 4 : Ov e r l a p p i n g A . I . S . s y s t e ms d e c r e a s e t h e r a t e o f o r g a n i z a t i o n a l

l ea rn ing re la t ive to segrega ted A. I .S . under a l l in fo rmat ion cond i t ions .

S I M U L A T I O N

T w o a s p e c t s o f A . I . S . a r e a d d r e ss e d : m a n a g e m e n t re p o r t i n g s tr u c tu r e , wh o r e p o r ts to wh o m .

a n d t a sk d e c o mp o s i t i o n , wh o h a s a c c e s s to wh a t i n f o r ma t i o n . Ou r a p p r o a c h i s a n e x te n s i o n o f

C a r l e y ' s (1 9 9 0 , 1 99 2) e x p e r i e n t ia l l e a rn i n g mo d e l ( E L M ) r e s e a r c h f r a me wo r k fo r e x a m i n i n g

o r g a n i z a t io n a l l e a r n i n g p e r f o r ma n c e u n d e r v a r i o u s d e s i g n c o n s t r a i n ts a n d o p e r a t i n g c o n d i t io n s .

I n p r e v i o u s wo r k , C a r l e y ( 1 9 9 2 ) e x a mi n e d t h e r o l e o f h i e r a r c h y a n d o v e r l a p p i n g i n f o r ma t i o n


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u n d e r u n i f o r m i n f o r m a t i o n c o n d i t i o n s . W e r e p l i c a t e t h i s a n d e x t e n d t h e m o d e l t o e n v i r o n m e n t a l

u n c e r t a i n t y . S p e c i f i c a l l y , w e e x a m i n e h o w A . I . S . d e s i g n i s c o n t i n g e n t u p o n t h e n a t u r e o f

d i f f e r e n t i a l i n f o r m a t i o n a v a i l a b l e t o i n d i v i d u a l a g e n t s .

B e f o r e e x p l a i n i n g th e m o d e l , t h e fo l l o w i n g te r m i n o l o g y m u s t b e d e f in e d : 1 ) a b i t o f

e v i d e n c e - - a s i n g l e b i n a r y i n p u t w h i c h t h e o r g a n i z a t i o n g a t h e r s f r o m i t s e x t e r n a l e n v i r o n m e n t ,

w h e r e e a c h b i t r e p r e s e n t s t h e p r e s e n c e o r a b s e n c e o f s o m e f e a t u re o f t h e e n v i r o n m e n t ; 2 ) a

t a s k - - t h e s e t o f bi ts o f e v i d e n c e f o r w h i c h a s i n g le o r g a n i z a t i o n a l d e c i s i o n m u s t b e re n d e r e d ;

3 ) a s u b t a s k - - a s u b s e t o f t h e i n p u t b it s o f e v i d e n c e ; 4 ) a n a g e n t - - a d e c i si o n m a k e r w i t h in t h e

o r g a n i z a t i o n h i e r a r c h y , w h o c o n v e r t s i n p u t e v i d e n c e f r o m b e l o w i n t h e o r g a n i z a t i o n s t r u c t u r e

i n t o a n o u t p u t d e c i s io n r e c o m m e n d a t i o n , w h i c h i s p a s s e d u p th e s tr u c tu r e ; 5 ) a n e v e n t - - t h e

p r o c e s s b y w h i c h a n i n p u t t a s k i s c o n v e r t e d i n t o a s i n g l e o r g a n i z a t i o n a l d e c i s i o n .

T h e m o d e l a s s u m e s t h a t : 1 ) o r g a n i z a t i o n a l d e c i s i o n m a k i n g b e h a v i o r is h i s t o r ic a l l y b a s e d ;

2 ) o r g a n i z a t io n a l l e a r n i n g d e p e n d s o n t h e b o u n d e d r a t io n a l i ty o f in d i v i d u a l d e c i s i o n m a k e r s

w h o m a k e u p th e o r g a n i z a t i o n ; 3 ) in d i v i d u a l d e c i s i o n m a k e r s a n a l y z e s u b s e t s o f t h e o v e r a l l

t a s k ; 4 ) s u b o r d i n a te s c o n d e n s e t h e i r i n p u t d a t a i n to o u t p u t r e c o m m e n d a t i o n s t o th e i r su p e r i o rs ,

a n d t hi s i n f o r m a t i o n c o m p r e s s i o n o c c u r s a t e a c h n o d e i n t h e s tr u c t u re ; 5 ) o v e ra l l o r g a n i z a t io n a l

d e c i s i o n s d o n o t re q u i r e t h a t a c o n s e n s u s b e r e a c h e d e . g. a l e g it i m a t e p o l i c y m i g h t b e t o le t t h e

m a j o r i t y o p i n i o n r u le ) ; 6 ) t h e o v e r a l l o r g a n i z a t i o n a l d e c i s io n i s t w o v a l u e d e . g. g o / n o g o ) ; 7 )

e a c h i n t e r m e d i a t e d e c i s i o n is s im i l a r l y t w o v a l u e d ; a n d 8 ) th e o r g a n i z a t i o n f a c e s q u a s i -

r e p e t i t i v e i n t e g r a t e d d e c i s i o n m a k i n g t a s k s .

Q u a s i - r e p e t i t iv e t a s k s a r e s i m i la r b u t n o t i d e n t ic a l t o p r e v i o u s t a s ks . A n i n t e g ra t e d t a s k m e a n s

t h e t a s k i s t o o c o m p l e x f o r a s i n g l e d e c i s i o n m a k e r t o h a n d l e . F i r m e x a m p l e s i n c l u d e p e r i o d i c

d i v i s i o n a l b u d g e t s a n d p e r f o r m a n c e r e p o r t s , a n d m u l t i - p r o d u c t s c h e d u l i n g . S u b - d e c i s i o n s o f

m u l t i p l e a g e n t s m u s t b e c o m b i n e d i n s o m e f a s h i o n , d e p e n d i n g o n o r g a n i z a t i o n a l d e s i g n , t o r e a c h

a n o v e r a l l d e c i s io n . T h e t a s k s o f in t e re s t h e r e a re a s s u m e d t o b e n o n - d e c o m p o s a b l e , m e a n i n g

t h a t c o m b i n i n g t h e c o r r e c t s o l u t i o n s t o e a c h s u b t a s k m a y n o t a l w a y s y i e l d t h e c o r r e c t s o l u t i o n

t o t h e o v e r a l l t a s k .

I n t h i s m o d e l , e a c h t i m e t h e o r g a n i z a t i o n f a c e s a n i n p u t t a s k a n d d e t e r m i n e s w h a t i t s

o r g a n i z a t i o n a l r e s p o n s e w i ll b e , a d e c i s i o n m a k i n g e v e n t i s s a id t o h a v e o c c u r r e d . E a c h o f t h e

i n p u t t a s k s t h a t th e o r g a n i z a t i o n f a c e s i s r e p r e s e n t e d b y a b i n a r y s t r in g o f n b i ts , w h i c h w e

d e n o t e b y b = b i . . . . . b n ) . E a c h b i t b i r e p r e s e n ts o n e e l e m e n t o f th e i n p u t t a s k. W e c a n t h u s

c o n s i d e r e a c h b i t a s a f e a tu r e o f th e i n p u t t a s k a n d t h e s t ri n g o f b it s a s i n p u t e v i d e n c e t h a t t h e

o r g a n i z a t i o n m u s t a n a l y z e t o d e t e r m i n e a n a p p r o p r i a t e r e s p o n s e . T h i s i s n o t u n c h a r a c t e r i s t i c o f

f r e q u e n tl y m o d e l e d a c c o u n t i n g d e c i s io n e n v i r o n m e n t s s u c h a s a u d i t o r m a n a g e r i a l j u d g m e n t s i n

w h i c h d e c i s i o n m a k e r s a r e p r e s e n t e d w i t h e i th e r s e q u e n t ia l o f s im u l t a n e o u s p r o b a b i li s t ic

i n f o r m a t i o n b i t s a n d a s k e d t o r e a c h a b i n a r y d e c i s i o n s u c h a s i n v e s t i g a t e v a r i a n c e s / d o n o t

i n v e s t i g a t e v a r i a n c e s , i n v e s t / d o n o t i n v e s t, s a m p l e f u r t h e r / d o n o t s a m p l e f u rt h e r, o r q u a l i f y

o p i n i o n / d o n o t q u a l i f y o p i n i o n .

T h e o r g a n i z a t i o n is r e p r e s e n t e d b y a n u m b e r o f a g e n t s t h e s u b - d e c i s i o n m a k e r s ) e a c h o f

w h o m h a s a c c e s s t o a s u b t a s k s u b s e t ) o f t h e n b i t s t r in g , b i, b i + 1 . . . . b j w h e r e 1 < i < j < n .

E a c h a g e n t e x a m i n e s h i s / h e r l o c a l m e m o r y o f p r i o r t a s k s b i t p a t te r n s ) a n d th e c o r r e s p o n d i n g

p a s t d e c i s i o n o u t c o m e s i n a n a t t e m p t t o l e a r n w h a t t h e d e c i s i o n o n t h e c u r r e n t t a s k o u g h t t o b e .

T h a t i s , t h e y t r y t o l e a r n f r o m t h e i r p a s t e x p e r i e n c e , f o r e x a m p l e w h e t h e r o r n o t p a s t c a s h f l o w

p r o j e c t i o n s w e r e a c c u r a t e o r w h a t w a s t h e c a u s e o f h i g h d e f e c t r at e s. T o s t u d y o r g a n i z a t i o n a l

l e a r n i n g v i a t h is m o d e l , i t i s a s s u m e d t h a t t h e o r g a n i z a t i o n i n i t ia l ly k n o w s n o t h i n g a b o u t t h e b i ts

o f e v i d e n c e t h a t c o m p r i s e e a c h t a s k o t h e r th a n t h e f a c t t h a t e a c h b i t is tw o - v a l u e d 0 o r 1 ) a n d

t h a t t h e o v e r a l l d e c i s io n t o b e r e a c h e d i s s i m i l a rl y t w o - v a l u e d 0 o r 1 ). T h e c o n s t r u c t s o f th e

g e n e r a l m o d e l a n d th e i r i n t e rr e l a ti o n s h i p s a r e d e s c r i b e d i n O u k s e l a n d M i h a v i c s 1 9 9 5 ) .


8/19

8 A. M, OUKSEL et al

Three di fferent stylized organizat ional structures are studied. These structures can all be viewed

as being hierarchical in architecture, but composed of vary ing numbers of levels (one, two, or

three). The first is a single level structure which Carley referred to as a major ity team . The

second is a two level structure referred to as an expert team, and the third is a three level structure

known as a hierarchy (Carley, 1990). Figur e 1 shows the structures used in the simulation .

Twenty -seven bits (n = 27) of evidence are available per input task and each bottom level agent

handles three bits. A 27 bit task is used here s ince it is the smallest num be r of bits which al lows at

least a 3 level hierarchy where each decision maker has an odd nu mbe r of subordinates. An odd

num ber of bits is chosen so that a unique correct decision can always be directly determined (i.e. so

the majority rule decision mech anis m would neve r result in a tie).

Each bottom level agent examines his/her past experience with the 3 bit data pattern

encount ered and probabilistically determines which organizational response (0 or 1) is more

likely to be correct. The agent bases this decision upon the historical accuracy of the bit pattern

Hierarchy

(final decision = leader's udgement)

/to o o t 7

.. bits of evidence ... 0

I 1 1 I I

Expert Team

(final decision = leader's udgement)

o I o I o

t t t b , t s o f e , , i d e n . . . . . t ~ t

I o 1 1 o I o I

Agents

Majorily Team

(final decision = majority w.'~te)

t t o t t t /

... bits of e'.,idence ...

o 1 I o I o I

Fig. 1. Organization structures,


9/19


e n c o u n t e r e d r e l a t i v e t o t h e a c t u a l o u t c o m e - - i . e , t h e h it ra te . I n t h e c a s e o f t h e m a j o r i t y t e a m ,

t h e s e p r e d i c t i o n s b e c o m e v o t e s a n d t h e o r g a n i z a t i o n a l r e s p o n s e is d e t e r m i n e d b y m a j o r i t y

r u l e , w h e r e a s i n t h e o t h e r s t r u c t u r e s t h e p r e d i c t i o n s b e c o m e r e c o m m e n d a t i o n s t o t h e a g e n t s '

s u p e r io r s . E a c h s u p e r i o r i n t u r n tr e a ts h i s / h e r s u b o r d i n a t e s ' r e c o m m e n d a t i o n s a s i n p u t d a t a to

h i s / h e r o w n d e c i s i o n m a k i n g p r o c e s s , f o l l o w i n g t h e s a m e p r o b a b i l i s t i c h i s t o r i c a l l e a r n i n g

p r o c e d u r e a s e m p l o y e d b y t h e s u b o r d i n a t e s ( i. e. p a tt e r n m a t c h i n g ) . A n e x a m p l e o f t h is w o u l d b e

s a l e s f o r e c a s t s s u b m i t t e d b y p r o d u c t l i n e m a n a g e r s w h i c h a r e u s e d t o d e t e r m i n e o v e r a l l

d i v i s i o n a l s a l e s e s t i m a t e s . T h e s e e s t i m a t e s a r e t h e n r e v i e w e d a t a h i g h e r l e v e l a n d c o n s o l i d a t e d

i n t o a c o r p o r a t e s a l e s b u d g e t .

T h e b a s i c m o d e l a s s u m e s t h a t t h e a c t u a l e n v i r o n m e n t a l c l a s s i f i c a t i o n f u n c t i o n , w h i c h

a s s o c i a t e s a c o r r e c t d e c i s i o n w i t h e a c h t a s k , i s b a s e d o n a s i m p l e m a j o r i t y r u l e. T h a t i s, i f m o r e

t h a n n 2 d a t a b it s h a v e v a l u e s o f 1 , t h e n t h e t ru e o u t c o m e i s 1 (a l s o d e n o t e d H i ) . O t h e r w i s e , t h e

t r u e o u t c o m e is 0 (a l s o d e n o t e d H o ) . W e a s s u m e n is o d d t o a v o i d t i e s o r i n c o n c l u s i v e d a t a ,

s u c h a s a b i t p a t t e rn o f 0 0 1 1. S u p p o s e n = 9 a n d t h e re a r e 3 b o t t o m l e v e l a g e n t s o r d e c i s i o n

m a k e r s r e p o r t i n g t o a s in g l e m a n a g e r . A f t e r a n u m b e r o f t a s k tr ia ls , a t y p i c a l d e c i s io n m a k e r ' s

m e m o r y m i g h t r e se m b l e t h at s h o w n i n T a b l e 1 .

F u r t h e r s u p p o s e t h e c u r r e n t i n p u t t a s k w a s m o d e l e d a s 1 1 1 0 1 0 0 0 1. T h a t i s, a g e n t # 1 s e e s

1 1 1 a n d a g e n t # 2 s e e s 0 1 0 a n d a g e n t # 3 s e e s 0 0 1 . A f t e r m a t c h i n g o n t h e i n p u t p a t te r n 1 1 1

a g e n t # 1 ' s d e c i s i o n w o u l d b e a 1 ; w i t h p a t te r n 0 1 0 a g e n t # 2 ' s d e c i s i o n is 0 ; a n d w i t h 0 0 1 a g e n t

# 3 d e c i d e s t o r e c o m m e n d a 0 (T a b l e 1 ). T h e m a n a g e r ' s i n p u t p a tt e r n is t h u s 1 0 0 a n d a f te r

m a t c h i n g t h i s t o l o c a l m e m o r y , h e / s h e s e t s t h e o v e r a l l o r g a n i z a t i o n a l d e c i s i o n e q u a l t o a 0 .

H o w e v e r , h e / s h e i s in c o r r e c t. T h e t r u e o u t c o m e i s a 1 si n c e t h e i n p u t ta s k h a s m o r e l ' s t h a n O ' s

( 5 vs . 4) . T h i s t y p e o f ta s k , w h e r e c o m p l e t e l y c o r r e c t s u b - d e c i s i o n s a t e a c h s t a g e d o n o t

n e c e s s a r i l y l e a d to a c o r r e c t o v e r a l l d e c i s i o n , is w h a t i s r e f e r re d t o as a n o n - d e c o m p o s a b l e

d e c i s i o n t a s k ( C a r l e y , 1 9 9 2 ) .

T a s k d e c o m p o s i t i o n s c h e m e is d e f in e d a s th e s e t o f s u b t a sk s a s s i g n e d t o th e a g e n t s a t t h e

l o w e s t l e v e l o f t h e o r g a n i z a t i o n a l s tr u c tu r e . T h e s e g r e g a t e d s c h e m e is o n e in w h i c h e a c h d a t a

b i t c a n b e a n a l y z e d b y o n e a n d o n l y o n e b o t t o m l e v e l a g e n t ( i . e . t h e s u b t a s k s d o n o t o v e r l a p ) .

T h e o v e r l a p p i n g t a sk d e c o m p o s i t i o n s c h e m e i s o n e in w h i c h a d a t a b i t c a n b e a n a l y z e d b y

m o r e t h a n o n e a g e n t . F i g u r e 2 s h o w s t h e t w o d i f f e r e n t t a s k d e c o m p o s i t i o n s c h e m e s t h a t w e r e

s t u d ie d . T h i s o v e r l a p p i n g s c h e m e w a s i n c l u d e d t o s tu d y t h e e f f e c t o f d a ta r e d u n d a n c y o n

o r g a n i z a t i o n a l l e a r n i n g .

T h i s s i m u l a t i o n c a p t u r e s t h e n o t i o n o f w e i g h t s o f e v i d e n c e a n d a c c o r d s w i th e n v i r o n m e n t a l

r e al it y . T h a t i s , n o t e v e r y b i t o f e v i d e n c e i s n e c e s s a r i l y e q u a l l y i m p o r t a n t i n d e t e r m i n i n g t h e

Table 1. Typical memory for an agent

Inpu t ev idence H0 H1

5 7 7

1 4 2 2 2

1 4 2 2 2

1 1 2 2 4 2

1 4 2 2 2

1 1 2 2 4 2

1 1 2 2 4 2

1 1 1 7 5 7


10/19

l 0 A .M . OUKSEL et al

Agents

E1 E2 E3

E E 5 E 6

E7 E8 E9

S e g r e g a t e d

E19 E2 E21

Bits of Evidence

E22 E23 E24 E25 E26 E27

Agents

E6 E7 E8 E9

Overlapping

E22 E23 E24 E25 E26 E27 E1 E2 E3 E4 E5

Bits of Evidence

Fig. 2. Task decomposit ion schemes.

c o r r e c t d e c i s i o n f o r a n i n p u t ta s k . T h e p o t e n t ia l f o r n o n - u n i f o r m w e i g h t s o f e v i d e n c e i s m o d e l e d

v i a t h e i n c l u s i o n o f i n t e g e r c o e f f i c i e n t s f o r e a c h b i t o f e v id e n c e . T h u s e a c h b i n a r y v a r i a b le , b i,

i s m u l t i p l i e d b y i ts w e i g h t c o e f fi c i e n t, w i , a n d t h e s u m m a t i o n o f th e s e p r o d u c t s i s t h e n c o m p a r e d

t o s o m e t h r e s h o l d v a l u e t o d e t e r m i n e w h e t h e r t h e c o r r e c t d e c i s i o n i s H 0 o r H i .

A s m e n t i o n e d e a r l i e r , i t i s r e a s o n a b l e t o s u s p e c t t h a t o r g a n i z a t i o n a l l e a r n i n g p e r f o r m a n c e

d e p e n d s o n th e g o o d n e s s o f f it b e t w e e n a n o r g a n i z a t i o n ' s s t r u c tu r e a n d i ts e n v i r o n m e n t I n

a d d i ti o n , i t s e e m s i n t u i ti v e , d u e t o th e l a w o f a v e r a g e s o v e r a l a r g e s a m p l e o f s i m u l a t i o n r u n s ,

t h a t n o n - u n i f o r m w e i g h t s d i s t r ib u t e d a c r o s s i n p u t d a t a b it s w o u l d n o t y i e l d re s u l ts d i f f e r e n t f r o m

t h e u n i f o r m w e i g h t s c a s e .

S I M U L A T I O N R E S U L T S

Design of virtual experiment

T h e d e s i g n w a s a 3 2 2 . T h r e e d i f f e r e n t o r g a n i z a t i o n a l s t r u c t u r e s w e r e s t u d i e d : m a j o r i t y

t e a m s , e x p e r t t e a m s , a n d h i e r a r c h i e s ( s e e F i g . 1 ) . U s i n g a M o n t e - C a r l o s i m u l a t i o n , t w o d i f f e r e n t

t a s k d e c o m p o s i t i o n s c h e m e s w e r e c o n t r a s t e d , s e g r e g a t e d a n d o v e r l a p p i n g ( s e e F i g . 2 ) , a s w e r e

t h r e e t y p e s o f w e i g h t d i s t r ib u t i o n s , c l u s t e r e d ( s i m i l a r w e i g h t s a d j a c e n t t o e a c h o t h e r ) , d i s p e r s e d

( d i s s i m i l a r a d j a c e n t w e i g h t s ) , a n d u n i f o r m ( a ll w e i g h t s w e r e e q u a l ) . F o r e x a m p l e , 9 9 9 5 5 5 1 1 1

i s a n e x a m p l e o f c l u s t e r e d w e i g h t s , w h e r e a s 9 1 5 9 1 5 9 1 5 i s d i s p e r s e d . T h u s , i n t o t a l 1 8

d i f fe r e n t o r g a n i z a t io n a l c a s e m a n i p u l a t i o n s w e r e s t u di e d . T h e o p e r a t i o n a l i z a t io n o f th e s e

m a n i p u l a t i o n s w a s d e s c r i b e d i n t h e S i m u l a t i o n s e c t i o n a b o v e . T h e m o d e l o u t p u t p r o v i d e d t w o


11/19

A C C O U N T I N G I N F O R M A T I O N S Y S T E M S A N D O R G A N I Z A T I O N L E A R N I N G 11

d e p e n d e n t v a r i a b l e s : a s y mp t o m a t i c p e r f o r m a n c e l e v e l ( l e ar n i n g a c c u r a c y ) a n d s p e e d o f

lea rn ing .

E a c h c a s e wa s r e p l i c a t e d 5 0 t i me s . T h a t i s , t h e s i mu l a t i o n wa s r u n 5 0 t i me s . E a c h r u n

c o n s i s t e d o f 2 5 0 0 s a mp l e d e c i s i o n t a s k s ( e x c e p t f o r E x p e r t T e a ms , wh e r e 5 0 0 0 t a s k s we r e

n e e d e d b e f o r e o r g a n i z a t i o n a l p e r f o r m a n c e b e c a m e a s y m p t o t i c ) 1. E a c h t a s k i n v o l v e d 2 7 b i t s o f

p r o b a b i l i s t i c i n f o r ma t i o n , 3 b i t s e a c h a c r o s s 9 a g e n t s , e x c e p t t h e o v e r l a p p i n g t r e a t me n t wh i c h

i n v o l v e d 5 i n f o r ma t i o n b i t s . T a s k s we r e r e p e a t e d e a c h t i me wi t h i n f o r ma t i o n b i t s r a n d o ml y

c h o s e n wi t h re p l a c e m e n t ( s e e S i mu l a t i o n se c t io n ) . P e r f o r m a n c e le v e l wa s o p e r a t io n a l i z e d b y

ca lcu la t ing the pe rcen tage o f co r rec t dec i s ion m ade in a g iven se t o f t r ia l s . I f 65 ou t o f the l a s t

100 t r i a l s were co r rec t , the pe r fo rmance l eve l was 65% a t tha t po in t in the l ea rn ing p rocess .

S p e e d o f l e a r n i n g wa s me a s u r e d b y t h e n u mb e r o f d e c i s i o n t r i a l s r e q u i r e d u n t i l t h e

o r g a n i z a t i o n a t t a i n e d a t a l e a s t a 6 9 % p e r f o r ma n c e l e v e l , s i g n i f i c a n t l y a b o v e a 5 0 % r a n d o m

a c c u r a c y h i t r a te . T h e 6 9 % f i g u r e wa s c h o s e n b e c a u s e i t l a y j u s t b e l o w t h e l e v e l a t wh i c h t h e

wo r s t p e r f o r m i n g o r g a n i z a t io n a l d e s i g n ( m a j o r i t y t e a m/ s e g r e g a t e d t a s k d e c o mp o s i t i o n / c l u s t e r e d

we i g h t s ) h a d i t s p e r f o r ma n c e c e a s e t o i mp r o v e o v e r t i me .

P e r f o r m a n c e s c o r e s we r e c a l c u l a t e d v i a a m o v i n g a v e r a g e o f t h e n u mb e r o f c o r re c t d e c i si o n s

ou t o f the m os t r ecen t 100 t r ia l s . In add i t ion , the pe r fo rm anc e scores were sub jec ted to an

e x p o n e n t i a l s m o o t h i n g t e c h n i q u e t o a t te n u a t e mu c h o f t he v a r i a n c e wh i c h t h e y w o u l d o t h e r w i s e

e x h i b i t . T h e we i g h t i n g f a c t o r wa s c h o s e n , s o t h a t f o r a n y t i me wi n d o w t h e e s t i ma t e o f

pe r fo rmance was ca lcu la ted as : e s t ima te = 0 .3* (cu r ren t e s t ima te ) + 0 .7* (p rev ious e s t ima te ) .

T h e s mo o t h i n g f a c t o r wa s c h o s e n t o mi n i mi z e t h e v a r i a n c e i n t h e p e r f o r ma n c e e s t i ma t e s ,

wi t h o u t u n d u l y l e n g t h e n i n g t h e n u mb e r o f t i me p e r i o d s r e q u i r e d t o r e a c h t h e 6 9 % p e r f o r ma n c e

th resho ld p rev ious ly d i scussed .

imulation results

R e s u l t s o n l e a r n i n g p e r f o r ma n c e a n d s p e e d a r e s u mma r i z e d i n T a b l e s 2 a n d 3 . T o b e t t e r

v i s u a l i z e t h e s i mu l a t i o n r es u il ts , F i g s 3 - 5 a r e in c l u d e d t o s h o w g r a p h s o f l ea r n i n g p e r f o r m a n c e

i mp r o v e me n t ( u n d e r a s e g r e g a t e d t a s k d e c o mp o s i t i o n s c h e me ) .

F igure 3 shows tha t under cond i t ions o f un i fo rm w eigh t s o f ev idence the f l a t te s t s truc tu re , the

ma j o r i t y t e a m, l e a r n e d b o t h f a s t e r an d u l t ima t e l y b e t t e r t h a n t h e h i er a rc h y . T h e i mp r o v e m e n t i n

s p e e d w a s d u e t o d e c r e a s e d c o g n i t i v e l o a d . T h e m a j o r i t y t e a m o n l y h a d t o l e a r n 2 3 b i ts p e r a g e n t

wh e r e a s t h e h i e r a rc h y h a d t wo l e v e l s o f 23 l e a rn i n g . T h e m a j o r i t y t e a m ' s a d v a n t a g e i n t e r ms o f

l e a r n in g s p e e d i s e v e n m o r e p r o n o u n c e d w h e n c o m p a r e d t o t h e i n te r me d i a t e s t r u c tu r e , th e e x p e r t

t e a m. T h e c o g n i t i v e l o a d o f t h e e x p e r t t e a m w a s m u c h g r e a te r , i n v o l v i n g 2 9 bi ts of learning.

Ho we v e r , g i v e n a l o n g e n o u g h t i me h o r i z o n , t h e e x p e r t t e a m e v e n t u a l l y c a tc h e s u p t o a ma j o r i t y

t e a m ' s l e a r n in g p r o f i c i e n c y l e v el .

F igure 4 , wi th c lus te red ev idence we igh t s , shows tha t under these cond i t ions the ma jo r i ty

team s t ruc tu re su f fe r s a l a rge pena l ty in i t s o rgan iza t iona l l ea rn ing po ten t i a l , a s a one vo te /one

p e r s o n d e c i s i o n r u l e d o e s n o t d i s c r i mi n a t e b e t we e n a n a l y s t s w i t h d i f f e r e n t p r e d i c t i v e

in fo rmat ion . F igure 5 , on the o the r hand , r evea l s s imi la r t r ends wi th d i spe r sed we igh t s among

the th ree o rgan iza t iona l s t ruc tu res s tud ied to those exh ib i t ed under cond i t ions o f un i fo rm

weights (see Fig . 3) .

I n t he c a s e o f u n i f o r m w e i g h t s , ma j o r i t y t e a ms a c h i e v e d a f i na l p e r f o r m a n c e l e v e l ( 8 4 .8 % f o r

s e g r e g a t e d d e c o mp o s i t i o n a n d 8 2 . 8 % f o r o v e r l a p p i n g ) s i g n i f i c a n t l y a b o v e t h a t o f h i e r a r c h i e s ,

A s a m p l e s i z e o f 5 0 w a s c h o s e n s i n c e t h e b i n o m i a l p r o b a b i l i t y d i s t r i b u t io n a p p r o a c h e s a n o r m a l d i s t r i b u t i o n w h e n b o t h

n p a n d n q a r e > 5. S i n c e o u r p r o p o r t i o n s o f s u c c e s s p ) r a n g e f r o m 0 . 7 0 t o 0 . 8 5 a n n = 5 0 w a s d e e m e d

s u f f i c i e n t l y l a r g e .


12/19

12 A. M. OUKSEL

e t a l

Table 2. Simulation results: final performance

Segregated task decomposit ion Overlapped task decomposi tion

Majority Expert Hierarchy Majority Expert Hierarchy

team team team team

Uni for m wei ght s /a = 84.8 ~ = 82.3 p = 80.0 ~ = 82.8 p = 81.9 p = 78.8

~r = 1.7 cr = 1.9 ~r = 1.8 ~r = 2.0 cr = 1.9 cr = 2.0

Clu ste red we ig ht s ~ = 70.9 la = 83.5 la = 79.4 ~ = 76.2 ja = 83.5 IJ = 80.9

cr = 4.2 cr = 1.8 ~r = 2.0 ~y = 1.9 ~r = 1.5 cr = 1.8

Di sp er se d we ight s la = 82.6 ~ = 80.9 la = 78.2 ~t = 83.4 ~ = 82.1 la = 78.2

o- = 2.2 ~ = 1.7 ~r = 2.3 cr = 1.8 o = 1.7 o- = 2.1

Notes: Each cell has n = 50 simulation runs. The final performance figures reported are the percentage of correct

organizational decisions achieved during the last 100 tasks (i.e. tasks 2401 through 2500).

w h i c h s u f f e r e d i n f o r ma t i o n c o mp r e s s i o n ( 8 0 . 0 % f o r s e g r e g a t e d d e c o mp o s i t i o n a n d 7 8 . 8 % f o r

over lapp ing) . In add i t ion , w i th un i fo rm weigh t s , ma jo r i ty t eams lea rned s ign i f i can t ly fa s te r than

h ie ra rch ies (18 .6 vs . 43 .9 dec i s ion pe r iods requ i red fo r segrega ted decom pos i t ion and 21 .2 vs .

50 .9 fo r over lapp ing) . These resu l t s conf i rm those found by Car ley (1992) fo r un i fo rm

weigh ts .

S ince the two dependen t va r iab les were no t s ign i f i can t ly co r re la ted , two separa te un iva r ia te

ana lys i s o f va r iance t e st s (ANOVA) were used ra the r than a s ing le mul t iva r ia te ana lys i s o f

va r iance (M ANOVA) 2. Us ing Co chran ' s C and Bar le t t ' s Box F t e st s , homogene i ty o f va r iances

assum pt io ns were f ound no t to be v io lated fo r pe r fo rman ce da ta bu t were v io la ted fo r speed

data. A Li l l iefors tes t fur ther indicated that Table 2 was f r om a norm al dis t r ibut ion. In Table 3 ,

Table 3. Simulation results: speed of learning

Segregated task decomposi tion Overlapped task decompos ition

Majority Expert Hierarchy Majority Expert Hierarchy

team team team team

Un if or m weig ht s la = 18.6 ~t = 88.1 ~ = 43.9 la = 21.2 /a = 77.2 p = 50.9

o - = 5.6 er = 19.2 cr -- 9.2 ~r = 6.2 o = 16.8 cr = 14.7

Clu stere d we ight s ~t = 36.0 ~ = 54.7 la = 27.4 la = 24.4 p = 62.0 p = 30.0

o- = 25.5 o- = 14.5 cr = 8.2 cr = 9.4 ~r = 13.6 o = 6 .2

Di sp er se d wei ght s ~ = 19.7 ~a = 87.2 ~ = 41.6 ~ = 20.3 la = 72.1 ~ = 45.3

o - = 5.5 o - = 19.3 o - = 10.2 o = 5.9 o = 15.2 o - = 10.1

Notes: Each cell has n = 50 simulation runs. The speed of learning figures reported were calculated by dividing the # of

decision tasks encountered (until a 69% exponentially smoothed performance level was attained) by 10. See Figs 3-5.

2 Only one of the 18 cells showed a significant correlation coefficient at the a = 0.05 level, and no cells showed

significance at the ~ < 0.01 level.


13/19

ACCOUNTING INFORMATION SYSTEMS AND ORGANIZATION LEARNING 13

9 0 ~ M a j o r i ty T e a m ~

:o

5 0 ~ . . . . - -

0 0 0 0 0 0 0 0 0 0 0 0 0

OJ ~ tO O0 0 04 'q ~0 ~ 00q I~

OJ O4 O4

T i m e ( in p e r i o d s )

Fig. 3. Learning speed--uniform weights.

- M a j o r i t y 1

- - H i e r a r c h y

however, the test cast some doubt as to the assumption of normality. Non-lJarametric tests for

differences in medians were therefore used for speed of learning.

More formally, our proposition 1 (P1) posited that majority and expert teams would

outperform hierarchies when information weights were uniform or dispersed. As can be seen in

Figs 3 and 5, mean final performance of both types of teams was better than for hierarchies

across overlapping and segregated information distribution schemes for both uniform and

dispersed conditions (F = 390; P = 0.00) 3, confirming P1. Hierarchies suffered performance

degradation because they encountered information compression losses across two levels of

decision making,

Proposition 1 also predicted that hierarchies would not be the best performer when weights

were clustered. This conjecture was also corroborated. Hierarchies performed significantly

better than majority teams (F = 197; P = 0.00) but significantly worse than expert teams across

overlapping and segregated information distribution schemes under the clustered weight

condition (F = 166; P = 0.00). Looking at the figures shown in Table 2, we see that when

weights are clustered, the majority teams final performance is significantly worse than either

hierarchies or expert teams. This is also seen in Fig. 4.

A simple majority rule, where each analyst s opinion counted equally towards the

organizational decision, was ineffective when some decision makers had access to more (less)

important information than others. The reason for this is that having each agent s vote count

equally towards the determination of the overall organizational decision is simply not

appropriate when some agents have access to more important evidence than do others. The real

9 0 - E x p e r t T e a m

8 5 . ~ _ 4 ~ _ ~ . ~ - ~ w ( ~

o 8 0 4 H = e r a r c h y _ ~ . . _ ~ . - ~ e - 4 ~ - - ~ . ~ - ~ ~ ~

7 5 i 4 - - 9 ~ T - ~ - ~ ~ - m

. . - ~ ~ n ~ - ~ - - ~q- = H / = - ~ - a - e ~ - =

~ 7 0 I

.~'~;~-.m-IC~ C~=- - ~ i-m-B I

M a j o r i t y I e a m

6 5 i . - . . c U ] .~

6 0

.~.~

-'i

50

0 0 0 0 0 O

Ow ~ ~ aO 0

0 ~ 0 0

0 4 . 8 8 8

04 O4 O4

T i m e ( i n p e r i o d s )

Fig. 4. Learning speed--clustered weights.

= M a j o r i t y

E x p e r t

H i e r a r c h y

In each F test, the degrees of freedom for the numerator between groups variance) was 1 while the d.f. for the

denominator within groups variance) was 98.


14/19


15/19

ACCOUNTING INFORMATION SYSTEMS AND ORGANIZATION LEARNING 5

information) can be safely ignored. The reduction in complexity which results once such

analysts can be identified seems to more than offset the time needed to learn which analysts

these are.

It is also interesting to note that the final performance levels for hierarchies are not

significantly different across the information conditions or between the task decomposition

schemes. The real world analog here seems to be that hierarchies are fairly stable, consistent

performers. They underperform majority teams when weights o f evidence are evenly distributed

among decision making agents, but outperform them when important evidence is concentrated

in certain areas. Similar results were found when comparing expert teams to majority teams.

im u la t io n p a ra m eters a n d co g n i t ive lo a d

It is important to appreciate the extent to which the results are attributable to cognit ive load.

Expert teams learn more slowly due to an increased number of patterns they must recognize. As

this is a function of the number of agents in the team, a natural question to be considered is

whether the results are invariant to team size. In our simulation, decreasing team size from nine

to six decreases the number of patterns to be learned by the team from 2 9 to 26, a 4-fold

decrease. A similar agent decrease does not affect the hierarchy as significantly. The number of

middle level managers would decrease from three to two, resulting in one less 2 3 middle

manager pattern to be learned and one less manager pattern for the leader to learn. Hierarchies

will continue to have less complex patterns to learn because of narrower spans of control. The

speed differential between hierarchies and expert teams however will narrow as team size

decreases result in proportionately greater reduced cognitive load. This is an important

consideration when trading off expert team accuracy against speed.

Second, in our study only one hierarchical level was simulated. As the number of hierarchical

levels increases, hierarchical accuracy further deteriorates due to information compression.

Speed would also decrease as more managerial patterns need to be learned. This would make

teams comparatively more advantageous. Third, overlapping information was simulated using

2 5 ver sus 2 3 agent bits in the segregated condition. As overlapping information only improved

majority team accuracy with clustered information, increasing the overlapping information bits

would improve performance in this condition, but at a cost, speed. Cognitive load would

increase by 2n for n additional overlapping bits of information.

DISCUSSION

A.I.S. are designed to activate learning across a range of management accounting activities.

Current corporate concerns include, among others, operating budgets, capital investments,

productivity measures, new product development, value added activity analysis, target costing,

outsourcing and process re-engineering. In each of these areas, financial and non-financial goals

are determined. Actual performance is measured relative to these goals as managers learn

through feedback. An empirical question is the extent to which A.I.S. design and performance

in these operational areas have been affected by recent trends in flatter informational structures,

team decision making and lateral information sharing networks. Our study provides preliminary

theoretical evidence with respect to these issues.

Forecast accuracy is particularly important for certain accounting decisions such as budgetary

profit projections, capital budgeting cash flow estimates and target cost projections. Consistent

with Carley 1992) and Williamson 1975), our results suggest that as vertical information

compression is decreased, lateral A.I.S. perform well relative to hierarchical A.I.S., provided the


16/19

16 A.M . OUKSEL

et al

i n fo rmat io n a l en v i ro n men t i s r e l a t iv e ly u n i fo rm ac ro ss ag en t s . T h i s su g g es t s t h a t fo r f a i r ly

ro u t in i zed acco u n t in g p ro jec tio n s su ch as p ro jec t m an ag em en t sch ed u l in g o r o p e ra t in g b u d g e t s

fo r mature p ro duct l ines , f la t ter A.I .S . wi th on ly local agen t fe edba ck shou ld be a dop ted .

M ajo r i ty teams fo l lo w a o n e p e r so n /o n e v o te d ec i s io n ru l e an d so h av e n o w ay o f l ea rn in g to

d i sc r im in a te b e tw een an a ly s t s w i th g o o d p red ic t iv e in fo rmat io n . A ssu min g r e l a t iv e ly u n i fo rm

w eig h t s o f ev id en ce fo r o p e ra t in g b u d g e t s an d p ro jec t man ag emen t , t h e re is n o n eed fo r su ch

d iscr iminat ion s ince a l l analys ts have access to equal ly impor tan t in fo rmat ion . Thus the major i ty

t eam s t ru c tu re i s w e l l su i t ed to th is t y p e o f en v i ro n men t .

W h en en v i ro n m en ta l i n fo rmat io n o f d i f f e ren t ia l imp o r t an ce i s c lu s te red w i th in ag en t s , l a te ra l

A . I .S . n o lo n g er in d i sc r im in a te ly o u tp e r fo rm h ie ra rch ies . W i th c lu s t e red in fo rmat io n , ma jo r i ty

teams are more vu lnerab le to un in formed analys ts ' e r ro rs than h ierarch ies . In h ierarch ies ,

mu l t ip le l ev e l s o f i n fo rmat io n p ro cess in g b u f fe r t h e o rg an iza t io n f ro m an a ly s t e r ro r b y r ed u c in g

th e n u mb er o f cases in w h ich a s in g le an a ly s t can a f f ec t t h e o v era l l o rg an iza t io n a l d ec i s io n

o u tco m e (C ar l ey , 1 99 0) . T h ese h i e ra rch ica l l ev e l s o n th e o th e r h an d a l so in t ro d u ce in fo rmat io n

co mp ress io n an d lo ss o f accu racy . In c lu s t e red en v i ro n men t s , ex p er t t eams o u tp e r fo rm b o th

majo r i ty t eams an d h ie ra rch ies. M an ag er s l ea rn to d i f f e ren t i a l ly w e ig h t t h e i r su b o rd in a tes

recom m enda t ions . As foun d em pir ical ly (Go rdon Mil ler , 1976 ; Gov indarajan , 1984 ;

K h an d w al l a , 1 97 2) , en v i ro n m en ta l co n t in g en c ies a f f ec t acco u n t in g r ep o r t in g . In m o re u n ce r t a in

en v i ro n men t s , w h ere th e r e l a t iv e imp o r t an ce o f l o ca l i n fo rmat io n d i f f e rs w id e ly b e tw een ag en t s ,

expe r t learn ing is necessary . A.I .S . shou ld be des igned to t rack agen ts and d i f fe ren t ia l ly weigh t

mul t i -agen t in fo rmat ion .

C ap i t a l i n v es tmen t s fo r ex amp le d em an d m u l t i- ag en t ex p er t ise . A . I .S . sh o u ld b e d e s ig n ed to

mo n i to r cash f lo w co mp o n en t s o f p ro jec t fo recas t accu racy o v er r ep ea ted cap i t a l b u d g e t in g

d ec i s io n s . T h i s r e in fo rces l ea rn in g o f t h e r e l a t iv e imp o r t an ce o f su b se t s o f acco u n t in g

in fo rmat io n su ch as t ech n o lo g y t ran s fe rs , q u a l i t y a s su ran ce an d t ax a t io n i s su es w h ich a re jo in t ly

v i t a l t o th e su ccess o f th e in v es tmen t . In s t i tu t io na l m em o ry o f t h ese ev en t s can b e cap tu red an d

t ran s fe r red to n ew ly fo rmed cap i t a l b u d g e t in g t eams in o rd e r t o m i t ig a t e th e r i sk s a s so c ia t ed

with env ironmental uncer ta in t ies .

O v er l ap p in g ag en t A . I.S . r ep o r t in g o n ly imp ro v e s p e r fo rma n ce w h en in fo rm at io n is c lu s t e red

w i th in ma jo r i ty t eams . T h i s acco rd s w i th in tu i t i o n . S h ar in g u n i fo rm o r r an d o mly d i s t r ib u ted

acco u n t in g in fo rmat io n d o es n o t imp ro v e p e r fo rman ce . N o r i s sh a r in g c lu s t e red ag en t

in fo rmat io n n ecessa ry fo r an ex p er t t eam th a t l ea rn s w h ere d i ag n o s t i c i n fo rm at io n r es ides . F o r

ex amp le , p e r fo rm an ce o f p ro cess r e -en g in ee r in g d o es n o t d ep en d o n o v er l ap p in g p ro d u c t io n o r

h u man reso u rce in fo rmat io n b e tw een t eam memb ers . S in ce in d iv id u a l ex p er t i se i s r eco g n ized

by the team, there i s no po in t in dup l icat ing th is exper t i se between agen ts .

T h e f in d in g s r e l a t ed to th e v a lu e o f o v e r l ap p in g A . I .S . i n m a jo r i ty teams h av e imp l i ca t io n s fo r

ad hoc c ro ss - fu n c t io n a l t eams . F o r ex amp le , t eams co n s t i t u t ed so le ly fo r t h e p u rp o se o f

d ec reas in g t a rg e ted p ro d u c t io n co s t s , d ev e lo p in g p ro d u c t p ro to ty p es an d l au n ch in g n ew

p ro d u c t s a re in c reas in g ly co mm o n . In o rd e r t o a t t a in a t a rg e t co s t a t T o y o ta , mark e t in g p ro v id es

sa les p ro jec t io n s fo r a l t e rn a t iv e en g in ee r in g d es ig n s u n d er v a r io u s co s t scen ar io s a s so c ia t ed w i th

th ese d es ig n s . In n e w ly co n s t i t u t ed t eams , w i th n o p o ss ib l e h i s to ry o f en v i ro n men ta l p red ic t io n

ex p er t i se , a ma jo r i ty ru l e d ec i s io n may w e l l p rev a i l . O u r r e su l t s su g g es t t h a t A . I .S . d es ig n ed

w i th o v er l ap p in g c lu s t e red in fo rmat io n b e tw een ag en t s s ig n i f i can t ly imp ro v es p e r fo rman ce .

In to d ay ' s r ap id ly ch an g in g t ech n o lo g ica l en v i ro n men t , n o t o n ly accu racy b u t sp eed o f

organ izat ional learn ing i s a lso a v i ta l conside rat ion in A.I.S . des ign . A.I .S . must ref lec t the fact

th a t t h e f i rm ' s v a lu e ch a in f ro m p ro d u c t d ev e lo p men t th ro u g h cu s to mer d e l iv e ry i s v e ry t ime

d ep en d en t . P ro d u c t d e v e lo p m en t times an d l i f e cy c les a re m u ch sh o r t er ; su p p l ie r l i n kag es a re

Ju s t -in -T ime; an d p ro d u c t io n th ro u g h p u t an d p ro d u c t d e l iv e ry a re f a st er . W h en in fo rmat io n i s


17/19


n o t c l u s t e re d b e t w e e n a g e n t s , o u r r e s u l ts i n d i c a t e t h a t ma j o r i t y t e a ms a r e n o t o n l y m o r e a c c u r a t e

t h a n h i e r a r c h i e s b u t p e r f o r m s i g n i f i c a n t l y f a s t e r a s we l l . T h i s c o r r o b o r a t e s t h e i n t u i t i o n o f

h i e r a r c h ic a l A . I . S . h a v i n g a s l o we r r e s p o n s e t i me t h a n f l a tt e r in f o r ma t i o n s t r u c tu r e s . R o u t i n i z e d

d e c i s i o n s s u c h a s r a w ma t e r i a l d e l i v e r i e s , p r o d u c t i o n s c h e d u l i n g a n d l o c a l p e r f o r ma n c e

r e p o r t i n g f e e d b a c k a r e w e l l s u i t e d t o f la t t e r n o n - o v e r l a p p i n g A . I. S . d e s i g n . I n s u c h

e n v i r o n me n t s , ma j o r i t y t e a ms mi n i mi z e i n f o r ma t i o n c o mp r e s s i o n a n d t h u s t e n d t o l e a r n b e t t e r

t h a n h i e r a r c h i e s , a n d a l s o mo r e q u i c k l y t h a n e x p e r t t e a ms .

Mo r e c o mp l e x ma n a g e me n t a c c o u n t i n g d e c i s i o n s s u c h a s a v a l u e c h a i n a n a l y s i s o f a p r o d u c t

l i n e o r o u t s o u r c i n g d e c i s i o n s ma y r e q u i r e g r e a t e r a g e n t e x p e r t i s e . I n f o r ma t i o n o f d i f f e r e n t i a l

i m p o r t a n c e e x i s t s b e t w e e n t e a m m e m b e r s . W h i l e e x p e r t t e a m s c a n l e a d t o i m p r o v e d

p e r f o r ma n c e , t h e y d o s o a t a c o s t , t i me . E x p e r t t e a m l e a d e r s n e e d t i me t o l e a r n t h e r e l a t i v e

ab i l i ti e s o f the i r subord ina tes . M ana gers wi th in h ie ra rch ies a l so face th i s p rob lem , bu t the

r e d u c e d s p a n o f c o n t r o l a f f o r d e d b y i n c r e a s e d l e v e l s o f ma n a g e me n t l i mi t t h e c o mp l e x i t y o f

l ea rn ing ( i . e . 23 poss ib le inpu t pa t t e rns pe r manager in the h ie ra rchy ve r sus 29 fo r the exper t

t e a m l e a d e r ) . As a r e s u l t , h i e r a r c h i e s a l s o i n c u r s p e e d o f l e a r n i n g d e l a y s , b u t t o a mu c h l e s s e r

e x t e n t t h a n t h e e x p e r t t e a m.

T h e i mp l i c a t i o n f o r A . I . S . d e s i g n i s t h e c o s t - b e n e f i t t r a d e o f f o f s p e e d v e r s u s a c c u r a c y i n

c l u s t e r ed i n f o r m a t i o n e n v i r o n m e n t s s u c h a s c a p i t a l in v e s t m e n t s a n d v a l u e c h a i n a n a l y s i s. Wh e n

s p e e d i s a p r e d o mi n a n t c o n c e r n , h i e r a r c h ie s s h o u l d b e u s e d . Wh e n a c c u r a c y i s e s s e n ti a l, e x p e r t

t e a ms s h o u l d b e e mp l o y e d . T h e s e f i n d i n g s a r e s u mma r i z e d i n F i g . 6 , a c o n t i n g e n c y mo d e l f o r

c h o o s i n g A . I .S . s u p p o r t b a s e d o n t h e p a r a m e t e r s i d e n ti f ie d i n t h i s s tu d y . W h e n f a c e d w i t h a h i g h

d e g r e e o f u n c e r t a i n t y wi t h r e s p e c t t o t a s k e n v i r o n me n t a l c h a r a c t e r i s t i c s , h i e r a r c h i e s s e e m t o

r e p r e s e n t a c o n s e r v a t i v e c h o i c e s i n c e t h e y p r o v i d e t h e mo s t s t a b l e a c c u r a c y a n d s p e e d o f

l e a r n i n g p e r f o r ma n c e a c r o s s a l l c o mb i n a t i o n s o f e n v i r o n me n t a l p a r a me t e r s i n t h e s t u d y . T h e s e

f ind ings ex ten d Ca r ley ' s (1990 , 1992) ea r l i e r r e su l t s r ega rd ing the robus tness o f h ie ra rch ies to

u n c e r t a i n e n v i r o n me n t s .

Whi le the t a sk i s an abs t rac t ion o f the o rgan iza t iona l l ea rn ing p roces , i t does p rov ide a se t o f

e mp i r i c a l l y t e s t a b l e p r o p o s i t i o n s f o r f u t u r e r e s e a r c h . Of i n t e r e s t a r e i s s u e s o f i n f o r ma t i o n

a s y mme t r i e s a n d h o w p r o b l e ms o f a g e n c y mi g h t i mp e d e t h e l e a r n i n g p r o c e s s . I n a d d i t i o n ,

o r g a n i z a t i o n a l l e a r n i n g b e c o me s mo r e c o mp l e x i n d y n a mi c e n v i r o n me n t s . I n s u c h c a s e s ,

B a y e s i a n l e a r n in g m o d e l s m i g h t b e o f in t er e st . T h e o p t i ma l t ra d e o f f b e t we e n t h e n u m b e r o f

a n a l y s t s a n d b r e a d t h o f i n f o r ma t i o n is p a r t i c u la r l y i mp o r t a n t in r i g h t s i z e d ma n a g e r i a l

env i ronments . F ina l ly , i t wou ld be o f in te res t to examine a l t e rna t ive in fo rmat ion s t ruc tu res and

C lu s te red

W e i g h t s

istribution

D isp ersed

a n d U n i f o r m

H ie ra rch y

Majority

Team

Expert

Team

ajority

Team

T i m e c c u r a c y

C r i t ica l F ac to r

Fig. 6. A contingency model.


18/19

18 A . M . O U K S E L

et al.

t h e c o s t o f i n f o r m a t i o n r e l a t iv e t o o r g a n i z a t i o n a l o u t c o m e s ( M a l o n e , 1 9 8 7) . A l t e r n a t i v e

m e t h o d o l o g i c a l a p p r o a c h e s s u c h a s f i e ld s t u d i e s , o r g a n i z a t i o n a l s u r v e y s a n d c o n t r o l l e d

e x p e r i m e n t a l t e s ts o f th e s i m u l a t i o n r e s u l t s n e e d t o b e p e r f o r m e d t o e i t h e r s u b s t a n t i a t e o r r e f u t e

t h e p r e l i m i n a r y f i n d i n g s o f t h i s s t ud y .

A c k n o w l e d g e m e n t s - - T h e h e l p f u l c o m m e n t s o f t h e e d i to r , a n a n o n y m o u s r e v i e w e r a n d w o r k s h o p p a r t i c i p a n ts a t t h e

F i f t h B i a n n u a l A c c o u n t i n g R e s e a r c h C o n f e r e n c e a t th e U n i v e r s it y o f N e w S o u t h W a l e s a n d t h e C i t y U n i v e r s it y o f H o n g

K o n g a r e g r a t e f u ll y a c k n o w l e d g e d .

R E F E R E N C E S

Argo te , L . , Beckm an , S . E pp le , D . (1990) T he pe rs i s t ence and t rans fe r o f l e a rn ing in indus t r i a l s e t t ings . M a n a g e m e n t

Science, 36, 140-154 .

Argyr i s , C . Schon , D . (1978) Organizational learning: A theory_ o f action p erspective. R e a d i n g , M A : A d d i s o n -

Wesley.

As h ton , H . Brow n, E R . (1980) Des c r ip t ive mo de l ing o f aud i to

accounting information systems and organization learning: a simulation

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