Centralizing Data Management with Considerations of Uncertainty and Information-Based Flexibility
This paper applies the theory of real options to analyze how the value of information-based flexibility should affect the decision to centralize or decentralize data management under low and high uncertainty. This study makes two main contributions. First, we show that in the presence of low uncerta...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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M.E. Sharpe
2014
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| Online Access: | http://hdl.handle.net/1721.1/87774 https://orcid.org/0000-0001-9240-2573 |
| _version_ | 1826192322779414528 |
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| author | Velu, Chander K. Madnick, Stuart E. Van Alstyne, Marshall W. |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Velu, Chander K. Madnick, Stuart E. Van Alstyne, Marshall W. |
| author_sort | Velu, Chander K. |
| collection | MIT |
| description | This paper applies the theory of real options to analyze how the value of information-based flexibility should affect the decision to centralize or decentralize data management under low and high uncertainty. This study makes two main contributions. First, we show that in the presence of low uncertainty, centralization of data management decisions creates more total surplus for the firm as the similarity of business units increases. In contrast, in the presence of high uncertainty, centralization creates more total surplus as the dissimilarity of business units increases. The pivoting distinction trades the benefit of reduction of uncertainty from dissimilar businesses for centralization (with cost saving) against the benefit of flexibility from decentralization. Second, the framework helps senior management evaluate the trade-offs in data centralization that drive different business models of the firm. We illustrate the application of these propositions formally using an analytical model and informally using case vignettes and simulation. |
| first_indexed | 2024-09-23T09:09:43Z |
| format | Article |
| id | mit-1721.1/87774 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T09:09:43Z |
| publishDate | 2014 |
| publisher | M.E. Sharpe |
| record_format | dspace |
| spelling | mit-1721.1/877742022-09-26T10:52:43Z Centralizing Data Management with Considerations of Uncertainty and Information-Based Flexibility Velu, Chander K. Madnick, Stuart E. Van Alstyne, Marshall W. Sloan School of Management Madnick, Stuart E. This paper applies the theory of real options to analyze how the value of information-based flexibility should affect the decision to centralize or decentralize data management under low and high uncertainty. This study makes two main contributions. First, we show that in the presence of low uncertainty, centralization of data management decisions creates more total surplus for the firm as the similarity of business units increases. In contrast, in the presence of high uncertainty, centralization creates more total surplus as the dissimilarity of business units increases. The pivoting distinction trades the benefit of reduction of uncertainty from dissimilar businesses for centralization (with cost saving) against the benefit of flexibility from decentralization. Second, the framework helps senior management evaluate the trade-offs in data centralization that drive different business models of the firm. We illustrate the application of these propositions formally using an analytical model and informally using case vignettes and simulation. 2014-06-13T16:55:39Z 2014-06-13T16:55:39Z 2013-01 Article http://purl.org/eprint/type/JournalArticle 0742-1222 http://hdl.handle.net/1721.1/87774 Velu, Chander K., Stuart E. Madnick, and Marshall W. Van Alstyne. “Centralizing Data Management with Considerations of Uncertainty and Information-Based Flexibility.” Journal of Management Information Systems 30, no. 3 (January 1, 2013): 179–212. https://orcid.org/0000-0001-9240-2573 en_US http://dx.doi.org/10.2753/MIS0742-1222300307 Journal of Management Information Systems Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf M.E. Sharpe MIT web domain |
| spellingShingle | Velu, Chander K. Madnick, Stuart E. Van Alstyne, Marshall W. Centralizing Data Management with Considerations of Uncertainty and Information-Based Flexibility |
| title | Centralizing Data Management with Considerations of Uncertainty and Information-Based Flexibility |
| title_full | Centralizing Data Management with Considerations of Uncertainty and Information-Based Flexibility |
| title_fullStr | Centralizing Data Management with Considerations of Uncertainty and Information-Based Flexibility |
| title_full_unstemmed | Centralizing Data Management with Considerations of Uncertainty and Information-Based Flexibility |
| title_short | Centralizing Data Management with Considerations of Uncertainty and Information-Based Flexibility |
| title_sort | centralizing data management with considerations of uncertainty and information based flexibility |
| url | http://hdl.handle.net/1721.1/87774 https://orcid.org/0000-0001-9240-2573 |
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