Coordination: Evidence from the B-2 "Stealth " Bomber

decision-making by reducing agency (measurement) costs. This This paper explores the economic processes through which incombination of effects may generalize to other settings in which formation technology can facilitate coordination within and beinformation technology is used to promote coordination, espetween firms, The paper presents and analyzes a case study of cially in "virtual" or "disaggregated corporations. the B-2 "Stealth" bomber, an aircraft that was designed by four (Information Technology; Coordination; Governance) firms almost entirely by computer. The key information systems used in the project were (1) a common-access database to manage part designs and (2) an advanced system to perform structural analysis. These systems played a crucial role in enabling the four firms to coordinate their design and development activities precisely enough to meet the demanding engineering The industrial future, we are told, belongs not to large requirements imposed by the aircraft's unique mission. The pabureaucratic organizations, but to networks of small afper analyses the case study using transaction cost, agency, and information processing theories. filiated companies that exchange with each other using The analysis leads to several conclusions about the mechaadvanced information systems. These networks have nisms through which the variables emphasized in these theories been dubbed "virtual corporations." (Davidow and operated to improve coordination. First, the information sysMalone 1992, Byrne 1993) Malone et al. (1987), for extems aided coordination directly by making information proample, have argued that information systems reduce the cessing less costly. Second, this enhanced information processcosts of coordination between buyers and suppliers, leading made the governance of the project more efficient. In ing to a greater reliance on markets to organize economic particular, by establishing a "technical grammar" for commuactivity at the expense of hierarchies. In support of this nication, the systems helped to create social conventions around claim, Brynjolffson et al. (1994) found that increases in which firms could coordinate their activities, thus limiting the information technology (IT) investments by U.S. firms need for a hierarchical authority to promote coordination. This have been associated with a decline in firm size. technical grammar also reduced governance costs by reducing asset-specificity, thereby reducing risks associated with conScholars have also argued that advanced IT is leading tractual holdup. These interactions between communication and to more decentralization of decision-making within firms. governance effects have not been elucidated in the ITIcoordiZenger and Hesterly (1997) hold that firms are using IT nation literature. They are important in part because they help to "disaggregate" their activities to facilitate decentraliexplain why the vertically disintegrated organization of the prozation. Johnston and Lawrence (1988), Lawler (1988), ject proved viable. Finally, the systems facilitated decentralized and others argue that by reducing unit costs of processing 1047-7039/99/1002/0162/$05.00 Copyright