James Jordan
University of Minnesota, Twin Cities
Department of Economics
035 Mgmt/Econ 271
19th Avenue South
Minneapolis, MN 55455
Phone: (612) 625-5054
Fax: (612) 624-0209
Email: jordan@atlas.socsci.umn.edu
The Evolution of Networks
and the
Design of Accounting Information
Systems
(NSF/IRI-9312783)
Summary:
This project involves two lines of research on the development of networks and
decentralized decision-making within networks. The development of networks
is seen as
an evolutionary process by which organizations modify their internal
communication and
decision mechanisms in response to the perceived economic performance of
others.
Learning is modeled as the growth of decision trees via imitative
extension. Trees can
also be internally reorganized or contracted to economize on information
and decision
costs. Some cost-saving reorganizations reduce a decision-maker's ability
to perceive
possible improving imitations. The hierarchical structure of a tree is used to
interpret a decision-tree as an organization of managers whose place in the
hierarchy
determines the scope of their authority for growing or reorganizing the
tree. Examples
are given to show that the model gives rise to several varieties of
irreversibility.
In particular, a change in the environment can cause a mature dominant
organization to
be overtaken by new entrant, despite the absence of any fundamental
advantage for the
entrant.
The second line of proposed research concerns the design of management
accounting information systems for networks of productive activities. A
management
accounting system reports to activity managers information, such as cost
and revenue
information, aggregated from the actions of other activities, and also
measures the
performance of each activity. Activity managers propose budgets that
maximize their
measured performance. Different accounting systems can be compared
according to their
ability to ensure profitable budgets. A multi-activity cost system is
constructed to
support performance measurement according to ``economic value added''. The
period-by-period maximization of economic value added leads asymptotically
to the
maximization of discounted cash flows.
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