Anthropologies of information costs: Expanding the neo-institutional view

Neo-institutional economics is credited with acknowledging the role of a "positive information cost" in the formation of economic organizations. However, neo-institutional theory does not explicitly address the problems presented by the loss of information that occurs when organizations change from a face-to-face to electronic channels. An anthropological perspective, in contrast, allows us to explain why this occurs and how organizations can address the dislocations it causes. We argue that Frank Knight's concept of "uncertainty reduction," still prominent in current neo-institutional thinking, is insufficient for understanding changes in the firm interface, constitution, and cultural roles resulting from shifts in the cost and nature of information processing. As an extension, we explore paradigms from anthropology, suggesting that changes in the material and social mix of communication are critical in explaining the psychological, cultural and institutional roles that many organizations play, and discuss how these roles are transformed in electronic channels. A five-level framework of information mediation is developed through a case study of an insurance company that has undertaken a dramatic re-engineering of its primary value-adding processes. The framework extends the traditional neo-institutional focus on internal resource allocation towards societal demand and fulfillment of institutional needs. While the new IT/telecom-based processes have substantially improved its cost profile and shifted organizational boundaries, they have also transformed the medium of interaction between the insurer and its customers. As such, the company soon learned that mediating and processing its products through telecom-based channels fundamentally changed the characteristics of its product offering as well as its basis as a social institution.