Academic journal article Academy of Accounting and Financial Studies Journal

An Analysis of the Relationships among Information Scope, Organizational Proactiveness, and Firm Performance

Academic journal article Academy of Accounting and Financial Studies Journal

An Analysis of the Relationships among Information Scope, Organizational Proactiveness, and Firm Performance

Article excerpt

ABSTRACT

The widespread use of information technology no longer automatically conveys a competitive advantage to the users of such technology. Instead, the emphasis should be placed on the creative use of the information obtained through the technology rather than on the technology itself. One way to accomplish is to align the information systems design with the strategy that the organization is pursuing. Scope is an important characteristic of the information obtained through information systems while proactiveness is an important element of strategy. Although the relationship between these variables has been addressed from a conceptual perspective, this relationship has not been subjected to rigorous empirical analysis. This research examines these relationships based on a sampling of chief executive officers. The results suggest that the coalignment of information scope and organizational proactiveness has a significant and positive impact on firm performance.

INTRODUCTION

According to Carr (2003), the use of information systems has become so widespread that an investment in information technology does not necessarily guarantee a competitive advantage any longer. The important issue is to concentrate on the creative use of the information obtained from a system rather than the technology used to create, transmit and present the information (Dearstyne, 2004).

The above argument supports the proposition that organizations are more effective when their structural mechanisms and strategies are aligned or congruent (Chandler, 1 962). Information scope is an important element in the design of information systems (a structural mechanism) while proactiveness is an important element of strategy. While previous research has addressed these constructs from a conceptual perspective, the relationships between these two constructs, particularly their congruence, have not been rigorously analyzed in an empirical manner.

The purpose of this research is to examine the relationships among information scope, organizational proactiveness, and their associated impact on firm performance.

REVIEW OF THE LITERATURE

Information Scope

The scope of an information system is concerned with the characteristics of focus, quantification, and the time horizon of the information provided by the system (Chenhall and Morris, 1986). A traditional information system provides information which is focused on internal organizational events, stated in monetary terms, and based on historical data. In addition to the information provided by a traditional system, a broad scope information system provides managers with economic and noneconomic information concerning the external environment. A broad scope information system also provides measurements stated in non-monetary units as well as information which can be used in predicting the consequences of future events (Gordon and Miller, 1976).

Linn et al (2001) found that broad scope managerial accounting information does not moderate the impact of budget emphasis, budget participation and the perceived environmental uncertainty on the propensity to create budget slack. Sharma et al (2006) found that broad scope management information systems interact with individual managerial control mechanisms in both the decision facilitation and decision influencing roles of management.

Some of the previous research addresses information scope and organizational performance in a contingency framework, as does this study. GuI (1991) found that a sophisticated management accounting information system providing broad scope information had a positive effect on performance under high levels of uncertainty, but it had a negative effect on performance under low levels of uncertainty . Chong and Chong (1997) proposed that broad scope information is an important antecedent of organizational performance. Naranjo-Gil (2004) reported an indirect effect of sophisticated accounting information systems on performance acting through a Prospector strategy in a sample of Spanish hospitals. …

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