International Finance and Accounting Handbook

28.1 INTRODUCTION
(a) Intended Audience. This chapter is intended for professionals and managers in-
terested in the use of information technology (IT) in international firms. Some knowl-
edge of IT is assumed. A brief glossary of terms is provided at the end of this chap-
ter as an aid to those readers with little exposure to technology. Readers who feel
uncomfortable with the description of technology presented here and would like to
have more knowledge of concepts should consult a practical book on technology and
its management.^1

(b) Role of Information Technology (IT) in the International Firm. Executives man-
age largely on the basis of information. Managers in international firms typically re-
quire a greater quantity of more diverse information than do their domestic counter-
parts because information from foreign subsidiaries and from headquarters must be
combined with local information for many activities and decisions. In order for in-
formation from foreign subsidiaries to be understood and aggregated it must conform
to both local and global needs, and be qualified by particular knowledge about how
it has been gathered. Due to increasing time pressures of international competition,
in order to speed up the process, there is a tendency to use a firm’s technology infra-
structure for the exchange of information between and among a firm’s headquarters
and its subsidiaries.
Four factors govern the amount of information that is transmitted between a sub-
sidiary and its headquarters: the type, maturity, and scope of business activity at the
subsidiary, and the decision authority of local management. Type of activity can be
divided roughly into two categories: services and manufacturing. Services, because
they are heavily information intensive, tend to require that more information be trans-
mitted among organizational units than does manufacturing. The more mature a for-
eign subsidiary, that is, the more globally integrated it is, the greater the amount of
information it exchanges with other organizational units. The greater the scope of ac-
tivity at the subsidiary, the greater the amount of information communicated to head-
quarters and the other subsidiaries. Conversely, the greater the decision authority of
local managers, the less information exchanged with headquarters.
Information may be used for a variety of purposeswithin a firm ranging from de-
scribing a structured business transaction, such as an order, to communicating an in-

28 • 2 INTERNATIONAL INFORMATION SYSTEMS

(ii) Reengineering
Organizations 17
(iii) Groupware 17
(iv) End-User Computing 18
28.6 Issues in the Global Management
of IT 19
(a) Trans-Border Data Flow 19
(i) Key Issues 20
(ii) Management Strategies 20
(b) Local Telecommunications 20
(c) IT Architecture and Standards 21
(i) Central versus Distributed
Systems 22

(ii) Private versus Public

Networks 23

(iii) Network Management 23

(iv) Security 23

(d) Applications 23

28.7 Conclusion 24

GLOSSARY OF TERMS 24

SOURCES AND SUGGESTED

REFERENCES 25

(^1) McNurline & Sprague, 1989; Vaskevitch, 1993.