Redesigning process control mechanisms using EDI. An agency-theoretic perspective

We argue that the use of Electronic Data Interchange (EDI) allows organizations to redesign the control mechanisms that govern their processes. More specifically we have looked at relationships between agencies and their principals and analyzed what the impact of EDI usage might be on the mechanisms to measure and evaluate the performances of the agents. The paper draws upon developments in agency theory. The analysis is built around two propositions. It is proposed that since EDI allows to reveal more of the behavior of the agent than traditional communication, more behavior-based control can be implemented. Secondly, if EDI allows to improve the communication about the desired outcome of the agent´s process, more outcome-based control can be implemented. Material from a case study about an inter-organizational information system for multi-modal, multi-country transportation is used to illustrate the propositions. The system has been developed to improve the communication between shippers, consignees and their forwarding agencies. Furthermore, after discussing each proposition, the relevance of the proposition for a process re-engineering team is outlined