Academic journal article International Journal of Management

Information Systems (IS) Connectivity as a Moderator of the Effects of IS Support for Information Interpretation on Firm Performance: An Empirical Study

Academic journal article International Journal of Management

Information Systems (IS) Connectivity as a Moderator of the Effects of IS Support for Information Interpretation on Firm Performance: An Empirical Study

Article excerpt

This study examined and tested the roles of information systems (IS) connectivity in influencing the performance impacts of IS support for information sharing and IS support for information interpretation. Using data collected from a survey of large U.S. firms and the Research Insight (Compustat) database, the results showed that when IS connectivity was high, IS support for information sharing was positively related to profitability whereas IS support for information interpretation was negatively associated with profitability. These findings suggest that a high level of IS connectivity is a two-end sword for firms which rely on both IS support for information sharing and IS support for information interpretation for competitive advantage. On one hand, a high level of IS connectivity enabled a firm to reap economic benefits from IS support for information sharing. On the other hand, a high level of IS connectivity hindered the firm 's ability to obtain superior performance from IS support for information interpretation.

Introduction

Today, as more and more firms (especially those with large and complex IS infrastructures) develop and deploy a variety of disparate information systems (IS) to support different business activities and processes (March et al., 2000), there has been increasing emphasis on the connectivity or compatibility among different IS (Roth et al, 2002; Sharif et al., 2004). How does IS connectivity affect a firm's ability to use IS to generate and utilize valuable information and knowledge for competitive advantage and superior firm performance? This is the research issue that this study attempted to address. Specifically, the study sought to explore the potential moderating effects of IS connectivity on the performance impacts of IS support for information sharing and IS support for information interpretation. Here, IS connectivity refers to the ease at which different IS within a firm communicate and share information with one another without human intervention (Laudon & Laudon, 2002). While prior research has shown that IS support for information sharing and IS support for information interpretation are vital to a firm's ability to develop and utilize information and knowledge for performance improvements (Vandenbosch & Higgins, 1995; Goodman & Darr, 1998; Andersen & Segars, 2001), the potential influence of IS connectivity on the performance of such IS support has received scant attention in the extant literature. Further, in view of the growing recognition that a firm's internal contexts may affect the effectiveness of IS deployment (Goodman & Darr, 1998), discerning the potential moderating effects of IS connectivity would advance our understanding of the internal conditions under which IS support for information sharing and IS support for information interpretation may generate competitive advantage and superior firm performance.

The rest of the paper proceeds as follows. The next section begins with a discussion of the strategic roles of information sharing and information interpretation, followed by a review of research on IS support for information sharing and IS support for information interpretation. The potential moderating effects of IS connectivity on the performance impacts of these two types of IS support are then examined. Based on this discussion, the research hypotheses are developed for the empirical testing. The third section describes the research methodology and presents the findings. The last section discusses the implications of the research findings, the limitations of the study, and suggestions for future research and practice.

Literature Review and Hypotheses Development

The Strategic Roles of Information Sharing and Information Interpretation

It is well recognized in the literatures of knowledge management and organizational learning that information sharing and information interpretation influence a firm's ability to develop and utilize valuable information and knowledge for competitive advantage (Hambrick & Mason, 1984; Nonaka, 1994; Argote & Ingram, 2000). …

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