«Researchers have endeavored to increase understanding of the relationships between investments in information systems (IS), competitive advantage, ...»
much more integral role in firm performance than projected in many current studies. Put quite simply, competitive actions are made possible by the information and knowledge that is collected and disbursed through FCI‘s information systems. The use of information systems in this organization touches upon every aspect of engaging in competitive activity, from the factory floor workers and equipment, to the Corporate Controller, who utilizes information systems in administering the financial needs of a global firm. The impact of information systems upon firm performance is significant and clearly evident in the context of this study, as managers‘ emphasize the crucial role information systems in keeping this firm in its leading competitive position. A manager sums up this perspective in discussing an Entrepreneurial (Grimm et al., 2006) action of
Any decision we‘re going to make on offering a new product or going into a new market begins with a market analysis. Some of this we do ourselves through online research and some of it is done through reports we get from industry sources and the financial markets. We also put together our own sales forecasts and profit projections from our internal data. Then we consult with our engineers and production people to come up with the specifications for the product. It is up to them to determine if we can offer the product, either in terms of having the correct processes or having the capacity to meet demand. Our analysis shows that if we end up doing this deal it will create demand twice what we produced on an annual basis last year. (FCI Manager, new customer acquisition).
The importance of information can be traced from sources to firm performance.
While of course it is the competitive action itself that ultimately creates the impact upon firm performance, it is the information system that facilitates the conception, the enactment, and ultimately the execution of competitive actions, which in turn, impact
Getting the information into [the ERP system] gets the ball rolling. It‘s a matter of money made or money lost by this company. (FCI Manager)
Through the data analysis, the way in which managers separately and collectively view the formulation and enactment of competitive actions, and the integral role played by information systems in that context was discerned.
5.1. Discussion of Findings Study I conducted for this dissertation concluded with several important findings.
A general model of the findings from Study 1 is explicated as follows:
Conceiving: IT-Enhanced Organizational Information Processing and Competitive Action -- Information systems serve as a requisite platform for enhancing awareness of the internal and external environment, increasing a cohesive understanding of the motivation to act and firm capability to act, and reducing uncertainty of the consequences or benefits of action. Information systems augment organizational memory by facilitating information acquisition, information sharing, knowledge exchange, and interaction among decision-makers and serves as the platform to synchronize disparate managerial cognitions in relation to competitive actions or responses.
Enacting: Information-Driven Competitive Action Decision -- Information systems are used to extend the traditional limits upon competitive decision-making.
Information systems serve as the essential conduit and resource in a more rational,
internal and external environment, information on motivation and firm capability for action, but takes into account and is moderated by firm strategy, managerial style, commitment to quality, and organizational culture.
Executing: Execution/Abandonment of Competitive Action – In Execution of competitive activity, information systems augment traditional industry channels for knowing where and when to execute competitive actions and/or responses. Information systems provide the conduit for information and knowledge of where and when actions or responses will best play out toward improving relative firm performance. In Abandonment of competitive activity, information systems provide the platform for new information and knowledge that may give the firm the option of abandoning a competitive action, thus avoiding negative consequences to the firm if such information and knowledge does not come too late to evade negative consequences. Information systems provide the mechanism for the generation of information such as market projections and forecasts when making competitive decisions to be executed at some point in the future, which may either alleviate uncertainty or give the illusion of certainty of actions that are ultimately abandoned.
Firm Performance: Information systems serve as a conduit and resource for information on impact of competitive actions either executed or abandoned on financial and/or market firm performance.
Numerous studies have sought to identify the linkage between information systems, competitive advantage, and firm performance (Bharadwaj, 2000; Chi et al.,
to capture the complex relationship between information systems and firm performance.
This research provides an alternative perspective by presenting a process view (Ferrier, 2001; Mintzberg & McHugh, 1985) of the elements of the complex relationship between information systems, competitive action, and firm performance. The process model provides an answer to the question of how information systems impact firm performance in the context of competitive action. While the linkage between information systems and firm performance is clearly evident, the results indicate that the path may not be linear.
The comparative analysis made possible through the methodology allowed the examination of similarities and contrasts between the different perspectives of the various managers as well as across a variety of competitive actions to arrive at a common set of concepts. Through the use of interview data insight was gained into the actions taken by managers in this organization in facilitating firm visibility, cultivating new markets, gaining market share, product innovation, and competitive position within an information systems context. The information systems used and how they were used, why they were used, why IT-based information systems were obtained, and results of use or purchase and the role of IS in conceiving, enacting and executing competitive actions or responses to improve firm performance were identified. Additionally, insight was gained into the organizational environment, mission, structure, culture, strategy, and managerial perceptions and style, and the influence of these moderating factors in the competitive action selection.
community as well as the practitioner. This research contributes to the literature by the creation of a process model for understanding the relationship between information systems, competitive action, and firm performance. It describes the relationship in terms of four integral stages and demonstrates the interactions and movements from one stage to the next. Most importantly, the process model provides an explanation and answer to the question of how information systems impact firm performance in the context of competitive action. While the linkage between information systems and firm performance is clear, the path is not linear. As demonstrated through the data, the answer lies embedded within patterns in the organizational context.
This research suggests a fresh perspective for thinking about the relationship between information systems and firm performance. Most previous IS research has sought to examine the relationship within a narrow context, such as the influence of a particular kind of system upon a particular firm activity resulting in impacts upon firm performance. The true value of information systems comes from the information they provide, as indicated by the managers at FCI. The managers rely not upon systems per se, but the success of their firm and its dominant position in the marketplace are critically dependent upon the information and communication capabilities that their systems provide.
The study has implications for both the academic community as well as managers engaged in competitive actions and responses. The following sections provide an overview of these implications.
5.2.1. Research Implications. The model and findings discussed in this study address the following gaps in extant literature: the contradictory results in studies examining the impact of information systems on firm performance (Fairbank et al., 2006); the exclusion of how and why investments in IT affect firm performance in extant IS literature (Sambamurthy et al., 2003); and, the omission in competitive dynamics literature of how and why firms engage in certain strategic moves (Ketchen et al., 2004).
Differences exist across firms in the intentions and interpretations of key players, the competitive action/response process followed by firms, and the organizational context around competitive activity, aspects that are largely ignored in studies seeking invariant outcomes (Orlikowski, 1993). By taking into account the organizational context and the intentions of FCI‘s managers with regard to their competitive activity, the nature of the role of information systems in conceiving, enacting and executing competitive actions can be explained, evaluated and re-oriented toward actions that have a positive impact upon firm performance. The process model shows that the particular organizational context, the intentions of key players, and the conceiving-enacting-executing process followed by the firm will influence the manner in which information systems are utilized.
Existing models and frameworks in extant IS and competitive dynamics research tend to ignore or discount the importance of human intentions and actions in shaping the
objective, often secondary data and variance models that cannot capture context and process. Furthermore, contemporary IS and competitive dynamics literature focuses primarily on discrete outcomes, rather than the actual use of technology. This study addresses some of the issues identified in existing research and lays the groundwork for future study.
Results in the context of this study point to the importance of the interactions and interdependencies among the firm‘s managers and the role of information systems in a social network context. Thus, these findings lead toward a social computing network theoretical perspective, which shall be employed in Study II in this dissertation.
5.2.2. Practical Implications. This study examined competitive activity in one dominant firm in the manufacturing industry. However, certain general recommendations based upon our process model can be made. Competitive decisions rest upon effective information flow. However, effective information flow relies upon a combination of information on drivers of competitive action, internal/external sources of information, tacit and explicit knowledge resources and the flexibility of information provided through information systems. Managers should consciously evaluate the way in which information systems can be utilized within each of these concepts in order to reach maximum effectiveness in information flow. Otherwise, bottlenecks and disconnects will occur across the competitive dynamics process, perhaps thwarting opportunities for competitive advantage. Furthermore, when managers view information systems as a
systems as providing a service, competitive advantages can be realized.
Competitive decision-making in the context of competitive dynamics is fraught with peril, as such decisions require preemptive knowledge of competitors moves.
Information systems provide the essential conduit and platform for additional considerations at the IT-Enhanced Organizational Information Processing and Competitive Action level of our process model which can provide a stable platform for effective choice of competitive action. Furthermore, effective use and management of information systems at the competitive dynamics level can reduce uncertainty, decreasing the likelihood of the abandonment of a competitive action which may negatively impact firm performance. Finally, as the managers at FCI found, information systems can be used to facilitate a more rational decision-making process, providing an objective view of competitive circumstances and mitigating the influence of moderating factors such as culture or managerial perceptions.
5.3. Limitations The findings in Study I are based upon competitive activity within a dominant firm as well as upon an industry‘s unique characteristics. This dominant firm‘s use of information in the formulation and enactment of competitive action might not be indicative of every organization. Thus, it may be difficult to generalize the findings to non-dominant firms in other industries and other settings. However, a phenomenon described as institutional isomorphism (DiMaggio & Powell, 1983) suggests that firms tend to become homogeneous rather than heterogeneous due to the bureaucratization of
Paraphrasing Schelling (1978, p. 14), DiMaggio and Powell (1983) suggest that organizations respond ―…to an environment that consists of other organizations responding to their environment, which consists of organizations responding to an environment of organizations' responses‖ (p. 149). The managers of the focal firm in this
study tend to share this perspective:
They will always be trying to copy what we do, but the quality just isn‘t there.
(FCI Manager) Systemic generalizability (Lee & Baskerville, 2003) is not the primary goal of this research effort, as this study lays the foundation for a deeper understanding of a phenomenon. However, following the line of reasoning suggested by DiMaggio and Powell explicated above, it can be concluded that the findings will be at least theoretically generalizable to other firms.