Examination of a Path Model Relating Information Technology Infrastructure With Firm Performance

Abstract

that are difficult to imitate and that are valuable can give a company a competitive advantage in the marketplace. Barau and Mukhopadhyay (2000) suggest that many more studies should investigate the impact of IT on intermediate functional and operational measures such as internal operations, customer services, supplier interactions, or mass customization and not just directly on high level measures such as total cost of operations and profitability. Ravichandran and Lertwongsatien (2005) further contend that such intermediary performance measures should provide more conclusive results when related to intermediate-level performance measures as opposed to aggregate measures of firm performance. In following this suggestion in this study, we investigate the relationships among IT infrastructure, logistics information systems (LIS's) impact, and firm performance.An IT infrastructure is defined in the study as the shared IT resource consisting of a technical physical base of hardware, software, communications technologies, data and core software applications, and a human component of skills, expertise, and knowledge that combine to create IT services that are typically unique, or at least distinctive, to an organization (Byrd and Turner 2000). LIS's in the study are defined as IT applications that are specifically used to support the supply chain functions such as order processing, production plan and process control, warehouse management, supplier relationships, distribution and transportation management, sales and price management, and consumer service and customer management (Narasimhan and Kim 2001). This study explores the impact of these IT applications on supply chain functions. The firm performance measures used in this study are return on assets (ROA) and total cost of operations (TCO).One of the distinctive features of this study is the measure of the impact of LIS's on supply chain functions. Past research has recommended that to get a more accurate determination of the impact of IT on functions in an organization, researchers must relate the IT applications as closely to these functions as possible (Barua, Kriebel, and Mukhopadhyay 1995). The measures of LIS impact in this study are "direct" measures of the effect of these IT applications on supply chain functions such as order processing, production planning and process control, supplier relationships, customer management, among others. The term "direct" is used to convey that the effects of LIS's (as perceived by Chief Information Officer (CIO) respondents in our study) on supply chain functions are the actual measures used instead of using an implied relationship between IT and supply chains functions as proposed in earlier studies (Narasimhan and Kim 2001;Sanders and Premus 2005). THEORETICAL CONSIDERATIONS Information Technology Performance LiteratureTwo distinct research streams have emerged in the study of the relationship between IT and firm performance (Barua and Mukhopadhyay 2000). One stream uses production economics as an analysis tool Loveman...

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