Nik Maheran et al./ Elixir Management 35 (2011) 2825-2829 2825 Introduction In the last few decades management practitioners and psychologists had applied information-processing principles and theory to improve their management and organizational practice. Much of the information-processing researches were characterized in terms of one of four general models, which provide a guiding framework for research. These models were term as rational (Friedman, 1976), limited capacity (Simon 1957), expert (Glaser, 1984), and cybernetic models of information processing and behavior. Theoretically, researchers can become so immersed in particular information-processing applications and do not consider the possibility of alternative frameworks. For example, much of the management literature implicitly adopts either rational or limited capacity models of information processing. However, expert or cybernetic models often are more congruent with descriptions of information-processing behavior (Lord and Maher, 1990). Researchers however should reevaluate their current theoretical perspective particularly that often resulting in interventions which required difficult information processing model and not duly bound by particular perspectives,. Therefore, the existing theories need to be looked beyond a particular substantive area to assess the general application of information-processing principles in improving decision-making quality of an organization. To help remedy this situation, four models that encompass a large portion of the information processing work will be discussed and explored. Possibility of adopting an ‘integrated’ paradigm, that links information seeking behaviour and information processing capacity to impact investment decision quality will be proposed. The next section of this paper will scrutinize four accepted models in Information Processing research, followed by the empirical analysis to propose a new model and concluded the paper with discussion and recommendation. Rational Information Processing Model Rational models assume that people thoroughly process all relevant information in order to maximize a relevant outcome and using formal method to gather the information. Applications consistent with rational models often require explicit instruction and the use of formal procedures or informational aids such as computers for data analysis. On the other hand, according to rational model, information was seeking vastly from impersonal sources rather than personal sources. Traditionally, prescriptive, rational models dominated management science and economic theory. Economic theory (Becker, 1976; Friedman, 1976; Lucas, 1981) provides a general decision-making framework for allocating scarce resources to alternative ends. This framework asserts that individuals assign probability and utility values to hypothetical events and choose among available alternatives to maximize expected utility (Friedman, 1976). Thus, a general class of information- processing models, labeled rational models, underlies prescriptive economic, management, personnel, and motivational theories. Although rational models are appropriate in some situations and they can be followed by people, they do not provide a very general explanation of human behavior (Simon 1957). Limited Capacity Information Processing Model In contrast to rational model, limited capacity model focus on how people simplify information processing while still generating adequate but not optimal behaviors. These explanations of human behavior require only limited amounts and limited processing of information. Interest in these models stems from recognition of human information-processing limitations. Limited capacity models do not require extensive knowledge or omniscience, as do rational models. Instead, people work within a very limited conceptualization of problems, considering only a few of all possible alternatives. Thus, limited capacity models are more congruent with short- term memory capacities than rational models because they Elixir Management 35 (2011) 2825-2829 Structural equation modelling of an integrated information processing and decision making Nik Maheran Nik Muhammad 1 and Salamiah A. Jamal 2 1 Universiti Teknologi Mara, Kelantan 2 Universiti Teknologi Mara, Shah Alam. ABSTRACT Information processing model developed for management and psychological literature were from the basis of four general models, which provide a guiding framework for research. These models were term as rational, limited capacity, expert, and cybernetic models of information processing and behavior. Previous researcher argued that each model provides a different explanation of processing in several theoretical domains and has different methodological implications. However, the findings of the present study advanced and tested using structural equation modelling on the data collected from a sample of 118 Malaysian companies suggest that integrated information processing model is more appropriate in explaining extent of environmental scanning and information processing capacity and having a significant bearing on the quality of the decision made. © 2011 Elixir All rights reserved. Management ARTICLE INFO Article history: Received: 5 April 2011; Received in revised form: 19 May 2011; Accepted: 25 May 2011; Keywords Information Processing model, Environmental Scanning, Decision Quality. Available online at www.elixirjournal.org Tele: E-mail addresses: nmaheran@gmail.com, Salamiahajamal@yahoo.com © 2011 Elixir All rights reserved