Information Theory of Firm

Abstract

The article formulates the information theory of firm, introduces the concept of firm as an operating system, which controls the firm’s operation by the means of the information resources processing, in an analogy with the operating system at a microprocessor in the computing devices, represents the director as an information processing element, describes the board of directors as the electronically-scanned electronically-steered phased array radar, considers the scientific problem of strategy creation by the interlocking interconnecting overlapping directors in the boards of directors in the firms in the economic system with the induced nonlinearities. We highlight a fact that the director makes the information sensing, filtering, processing, resonant absorption, analysis, decision making, strategy creation, hence it can be empirically represented as a processing element with the Harvard or von Neumann director’s mindset architectures in line with the digital signal processing science. We think that the board of directors in corporate governance system can be theoretically represented as the electronically-scanned electronically-steered phased array radar with a certain number of electronic devices (directors can be modeled as electronic devices with the active antenna elements, filters banks, digital signal processors, memory chipsets in agreement with the microwave and digital signal processing sciences). We developed the MicroITF operating system and software programs, 1) to control the firm operation by the means of the information resources processing; 2) to accurately characterize the director’s performance by means of a) the filtering of the generated/transmitted/received information by the director into the separate virtual channels, depending on the information content, and b) the measurement of the levels of signals in every virtual channel with the generated/transmitted/received information by the director, in the overlapping interconnecting interlocking directors networks in the boards of directors in the firms during the Quality of Service (QofS) measurements process, and 3) to create the winning virtuous business strategies by the interlocking interconnecting directors in the boards of directors in the firms, using the patented recursive artificial intelligence algorithm.