Information Processing in the Theory of the Firm: The Rise of General Motors

This article reviews alternative theories of the firm and their relationship to the spectacular rise of General Motors during the 1920s. The article examines the degree of synchronization of GM's sales to dealers with dealers' sales to final consumers, both before and after Alfred Sloan's forecasting and information processing reforms. It also examines the link between the synchronization and GM's performance during the period. The data document a dramatic improvement in GM's information processing capabilities and a direct link between those capabilities and GM's profitability.