An important management question today is whether the anticipated economic benefits of Information Technology (IT) are being realized. In this paper, we consider this problem to be measurement related, and propose and test a new process-oriented methodology for ex post measurement to audit IT impacts on a strategic business unit (SBU) or profit center's performance. The IT impacts on a given SBU are measured relative to a group of SBUs in the industry. The methodology involves a two-stage analysis of intermediate and higher level output variables that also accounts for industry and economy wide exogenous variables for tracing and measuring IT contributions. The data for testing the proposed model were obtained from SBUs in the manufacturing sector. Our results show significant positive impacts of IT at the intermediate level. The theoretical contribution of the study is a methodology that attempts to circumvent some of the measurement problems in this domain. It also provides a practical management tool to address the question of why (or why not) certain IT impacts occur. Additionally, through its process orientation, the suggested approach highlights key variables that may require managerial attention and subsequent action.
Organizations today outsource diverse business processes to achieve a wide variety of business objectives ranging from reduction of costs to innovation and business transformation. We build on the information processing view of the firm to theorize that performance heterogeneity across business process outsourcing (BPO) exchanges is a function of the design of information capabilities (IC) that fit the unique information requirements (IR) of the exchange. Further, we compare performance effects of the fit between IR and IC across dominant categories of BPO relationships to provide insights into the relative benefits of enacting such fit between the constructs. Empirical tests of our hypotheses using survey data on 127 active BPO relationships find a significant increase (decrease) in satisfaction as a result of the fit (misfit) between IR and IC of the relationship. The results have implications for how BPO relationships must be designed and managed to realize significant performance gains. The study also extends the IPV to identify IC that provide the incen tives and means to process information in an interfirm relationship.
This paper examines the antecedents and consequences of Internet use in the procurement process. Drawing upon the resource-based view (RBV) of the firm and the technology, organization, and environment framework, we develop an integrative model that examines the antecedents and consequences of Internet use in two stages—the search stage and the order initiation and completion (OIC) stage—of the procurement process. The model enables us to deconstruct both the usage and the performance aspects of information technology (IT) in business processes, and to provide insights into the enablers of use and business value. The model is estimated with survey data from 412 firms. Our results suggest that while some resources, such as procurement-process digitization, influence Internet use in both the procurement stages, other resources, such as the diversity of organizational procurement knowledge, impact Internet use in only one stage. We also find that Internet use in the OIC stage has a more significant impact on procurement-process performance than use in search. This study extends the digital capabilities and firm performance literature in the context of electronic procurement. This study also contributes to the small but emerging stream of literature that investigates antecedents, the extent, and implications of IT use holistically.
Multisourcing, the practice of stitching together best-of-breed IT services from multiple, geographically dispersed service providers, represents the leading edge of modern organizational forms. While major strides have been achieved in the last decade in the information systems (IS) and strategic management literature in improving our understanding of outsourcing, the focus has been on a dyadic relationship between a client and a vendor. We demonstrate that a straightforward extrapolation of such a dyadic relationship falls short of addressing the nuanced incentive-effort-output linkages that arise when multiple vendors, who are competitors, have to cooperate and coordinate to achieve the client's business objectives. We suggest that when multiple vendors have to work together to deliver end-to-end services to a client, the choice of formal incentives and relational governance mechanisms depends on the degree of interdependence between the various tasks as well as the observability and verifiability of output. With respect to cooperation, we find that a vendor must not only put effort in a “primary” task it is responsible for but also cooperate through “helping” effort in enabling other vendors perform their primary tasks. In the context of coordination, we find that task redesign for modularity, OLAs, and governance structures such as the guardian vendor model represent important avenues for further research. Based on the analysis of actual multisourcing contract details over the last decade, interviews with leading practitioners, and a review of the single-sourcing literature, we lay a foundation for normative theories of multisourcing and present a research agenda in this domain.
Advances in new Information Technologies (IT) and changes in the business environment such as globalization and competitive pressure have prompted organizations to embark on reengineering projects involving significant investments in IT and business process redesign. However, the evidence of payoff from such investments can be classified as mixed as best, a problem we partly attribute to the absence of a strong theoretical foundation to assess and analyze reengineering projects. We seek to apply complementarity theory and a business value modeling approach to address some questions involving what, when, and how much to reengineer. Complementarity theory is based on the notion that the value of having more of one factor increases by having more of another complementary factor. Further, related developments in the optimization of “supermodular” functions provide a useful way to maximize net benefits by exploiting complementary relationships between variables of interest. Combining this theory with a multi-level business value model showing relationships between key performance measures and their drivers, we argue that organizational payoff is maximized when several factors relating to IT, decision authority, business processes and incentives are changed in a coordinated manner in the right directions by the right magnitude to move toward an ideal design configuration. Our analysis further shows that when a complementary reengineering variable is left unchanged either due to myopic vision or self-interest, the organization will not be able to obtain the full benefits of reengineering due to smaller optimal changes in the other variables. We also show that by increasing the cost of changing the levels of design variables, unfavorable pre-existing conditions (e.g., too much heterogeneity in the computing environment) can lead to reengineering changes of smaller magnitude than in a setting with favorable conditions.
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