Limitations of present research/critical thinking

While we believe that this study contributes to the important stream of studies on IT impact, two limitations are noteworthy. First, the study uses financial ratios and metrics to reflect process outcomes at the organizational level. While these metrics are widely used in strategic group analysis and do reflect important process outcomes, their tie-in with their construct domain may be questioned. For instance, the payables efficiency ratio captures only a limited aspect of supplier relations capability. Similarly, sales per unit asset does reflect an aggregation of resource allocation decisions, but could also reflect organizational orientation towards capital investment. While constrained by data availability, we would argue that despite this limitation, our metrics do reflect core process ideas, and can be effectively benchmarked with industry. However, true process measures should be at the process unit of analysis (e.g., cycle time, number of defects, improved product quality, customer satisfaction). We hope that such studies, despite difficulty in obtaining such data will be forthcoming.

As ...analysed,the impacts of IS on operational processes involved three aspacts:

  1. Automation.IS enhances the ability to produce more or better quality output from inputs. In order to improve manufacturing processes,it is now prevalent to use CAM, CIM, automated JIT systems and flexible manufacturing systems (FMS). With the assist of these information systems, processing capacity,labor efficiency, production costs,product/service quality are improved to a certian extent.Moreover,other systems such as CAD and computer numerically controlled machines (CNC) bring benefits to product development process as well.
  2. Informate.IS enhances the capability of storing, recovering, operating and distributeing information. Systems such as ERP are commonly adopted in numerous corporations.resulting in operational efficiency improvement.Apart from that,sales or marketing process and customer relationship process have also implemented these information systems aiming to coming up with better ways to forecast and find potential markets andsustain customers,respectively.
  3. Transform.Information systems including EDI, SCM systems, e-Business systems have helped the firm to integrate with its cooperative partners ,especially in the supply chain network,these information systems significantly reduce information asymmetry, operating costs and inventory levels.

As Alter (1996) mentioned IS may support for three levels of cross-functional integration:

  1. information sharing;
  2. coordination and
  3. collaboration.

A series of prior articles have mentioned that IS including Computer-Aided Engineering (CAE),Computer-Aided Design (CAD) and Computer-Aided Manufacturing(CAM) support staff from different departments to utilize the common information conveniently and efficiently and Computer-Integrated Manufacturing (CIM) can boost greater collaboration among different but relevant departments within firms,such as marketing, engineering, manufacturing, and other business responsibilities (Zhang and Lado 2001).

Because they enable more timely, accurate and complete information flows, ECS can be used to facilitate information sharing and coordination between different value activities (Alter, 1996; Neumann, 1994; Porter and Millar, 1985). Furthermore, This technology combines telecommunication systems, CAD and robots with other modern manufacturing technologies such as advanced sensor and control systems (Alter, 1996; Gold,1989; Goldhar and Lei, 1995). Studies of manufacturing and service firms have documented the operational benefits (e.g., improved productivity, reduced lead times and increased flexibility) accruing from IS-enabled crossfunctional integration (Fitzgerald, 1990; Gold, 1989;Groves, 1990; Koelsch, 1990; McFadden and Hoffer,1991).

The purpose of this paper was to propose and test a model of the relationship between organizational use of e-business technologies, intra and inter-organizational collaboration, and performance. A number of important findings emerge that have both theoretical and managerial implications. First, a significant contribution of this study is the empirical test of theoretical assumptions in the extant literature of the influence of e-business technologies on collaboration and organizational performance. e-Business technology use is shown to have a significant direct impact on performance and a significant impact on both intra and inter-organizational collaboration. This finding underscores the important role e-business technology plays in the functioning of supply chain organizations.

This research also suggests that collaboration is not synonymous with e-business technology use. Rather, e-business technology use is a separate construct that promotes both intra and inter-organizational collaborative relationships. This is noted as occasionally companies presume that having information technology in place automatically assumes that collaboration exists. Collaboration is a result of human interactions which can only be supported by IT, one of which are e-business technologies, but not replaced. This is an important point for managers as they consider funding for various IT initiatives. Based upon the findings of this study, e-business technology efforts that particularly promote collaboration should be given greater consideration.

Another important finding is with regard to the significant impact of intra-organizational collaboration on performance. Although this finding is not new, it does validate and further confirm the important role internal collaboration serves. The significant impact of intra-organizational collaboration on performance suggests that companies should invest in strategies that promote cooperation and integration across the functions of the organization. As use of e-business technologies is shown to promote internal collaboration, companies should also consider investing in these types of information technologies.

Last, our model supports the finding that inter-firm collaboration influences intra-organizational collaboration, which in turn impacts performance. This finding is important as it supports previous findings. This finding, however, may not be surprising. By engaging in inter-organizational collaboration companies automatically force higher levels of internal collaboration. Benefits of collaboration appear to be synergistic in nature. They help members of the organization access information in a timely manner, process relevant information efficiently, and make informed decisions both internally and across enterprises.

There is an important caveat to our findings that was raised in the small number of follow-up interviews. The variables used in our study for inter-organizational collaboration, although derived from the literature, focus on operational issues of collaboration rather than broader strategic issues. The comments from the follow-up interviews suggest that these findings may not necessarily hold true for strategic issues of collaboration. This underscores the complexity of collaboration and that an important issue for future research may be to look at this construct at an even greater level of detail.

Our findings show that firm use of e-business technologies impacts performance both directly and indirectly by having a positive impact on intra and inter-organizational collaboration. Intra-organizational collaboration is shown to have a strong direct impact on performance and, in turn, is impacted by inter-organizational collaboration. These findings outline the importance for companies to invest in e-business technologies to promote collaboration internally.

Current researches that have examined the impact of IS on strategic from the dynamic capability view of the resource-based literature (Martin, 2000) have mentioned that IS serve as a platform for maintain and enhance dynamic capabilities and sustainable competitive advantage,create a firm's long-term success (Byrd, 2001; Sambamurthy et al., 2003). Base on this analyse, IS can be linked to long-term superior performance through their influence on strategic flexibility andcompetitive advantage.

Showed that IS support for product flexibility was positively related to sales growth and returns on sales. The study also found a stronger association between IS support for product flexibility and ROS, and a positive relationship between IS support for cross-functional coordination and sales growth, when IS were complemented by unique knowledge and information.

Impact of IT on firm's performance

The impact of IT on the organization has been studied for a long time. In general, IT is the key tool to promote higher levels of organizational integration, expected to result in improved corporation performance (Vickery et al., 2003).

Research regarding the direct impact of IT on specific performance measures has resulted in inconsistent results, suggesting that a 'productivity paradox' exits ([Lim et al., 2004] and [Sriram and Stump, 2004]). Numerous explanations have been offered for this paradox, such as management's failure to leverage the full potential of IT (Dos Santos and Sussman, 2000), ineffective implementation (Stratopoulos and Dehning, 2000),, and the presence of a time lag between IT investment and its actual impact on performance ([Deveraj and Kohli, 2000] and [Rai et al., 1996]). Researchers have also tried to explain the apparent paradox by drawing attention to the differences between the research traditions of the disciplines (e.g. economics, production, and strategy) from which the studies are derived ([Sircar et al., 2000] and [Sriram and Stump, 2004]).

Another view of IT's impact on performance is that IT improves firm performance indirectly by fostering inter-organizational relationships (Hammer and Mangurian, 1987). Wen et al., 1998 H.J. Wen, D.C. Yen and B. Lin, Methods for measuring information technology investment payoff, Human Systems Management 17 (2) (1998), pp. 145-153. View Record in Scopus | Cited By in Scopus (5)Wen et al. (1998) consider that the benefits of IT may be "qualitative, indirect, and diffuse" and suggest that IT may ultimately impact performance by influencing relational outcomes. For example, extranet IT investments made by Fujifilm in Canada allow the firm to provide a wider range of information to dealers and resellers and also enable the company's salespeople to build online relationships with these intermediaries (Gilbert, 2002). These studies suggest that it may be important to simultaneously consider a direct and indirect impact of e-business technology use in order to measure its full impact on organizational performance.

As Melville et al. number of firm level studies examined the relationship between the firm's IT investment and organizational performance variables including profitability and productivity (Table ?). While some found no evidence of IT payoff [34] and [40], a few others found negative IT effect on profitability [29], administrative productivity [33] and cost ratios [5] and [38], and some found positive IT effect on labor productivity [29] and [33], productivity growth [37], lower inventory levels [28], higher profitability ratios [5] and [38], lower cost ratios [30], greater market share and consumer surplus [29] and [35], substitutability of non-IT capital and labor by IT capital [31], and better hospital performance [36] and [39].

Benefits of information systems(IS)

There are a couple of academic papers that use publicly available data to examine the effect of information systems on accounting metrics. Based on a sample of 50 publicly traded firms that announced ERP adoption during 1993 and 1997 Poston and Grabski (2001) investigate the effect of ERP adoption on profitability. They use paired t-tests to compare the profitability in the year before the implementation with the profitability one, two, and three years after ERP implementation. Although they do not find evidence of improvement in profitability in the three years after implementation, their results are questionable because of their methodology. In estimating changes in year-to-year performance they do not use any benchmarks to control for changes in performance that may be related to the sample firm's prior performance, industry, or economy. Therefore, it is not correct to equate changes in performance as estimated by Poston and Grabski (2001) to the effect of ERP investments on profitability, and conclude that ERP systems have no effect on profitability. Using benchmarks to control for normal changes in performance is a basic and minimum requirement in estimating performance effects of any corporate investment or decision.

Scepticism about the value of IS has been raised, due to the gap between IS investment and the widespread perception of the lack of value from IS (Zhu & Kraemer, 2005). Thus, today information systems (IS) researchers face pressure to answer the question of whether and how IS creates value. Although showing recent signs of advance, much of the existing e-business literature still relies, to a great extent, on case studies, anecdotes, and conceptual frameworks, with little empirical research directed to assessing the impact of IT on firm performance—especially in traditional companies (Brynjolfsson & Kahin, 2002). Case studies on firms such as eBay and Amazon show e-business can create business value, but there is a question as to whether the lessons learned from these "Internet giants" are more widely applicable.

In order to find out the relationship of informantion systems and their financal impacts, objective performance data are widely used in stock returns and accounting metrics,and those data collected from surveys and experiments. Regarding stock returns, researchers have used event study methods to analyze the short-term stock market reaction to announcements of ERP implementation. Hayes et al. (2001) and Ranganathan and Samarah (2003) estimate the stock market reaction to ERP implementation announcements based on samples of 91 and 136, respectively. Although not directly related to ERP systems, Chatterjee et al. (2002) examine the stock market reaction to 112 infrastructural IT investment announcements about technologies that provide a platform for future business applications. These studies find statistically significant abnormal stock market returns ranging anywhere from 0.5% to 0.84%, indicating that the market reacts positively to IT investment announcements.

While some found no evidence of IT payoff (Strassmann 1997), a few others found negative IT effect on cost ratios [5] and [38], and some found positive IT effect on labor productivity [29] , productivity growth [37], higher profitability ratios [5] and [38]greater market share and consumer surplus [29] and [35].

For many years, numerous empirical studies have been conducted regarding the relationship between investments in IT and associated effects on firm performance (See Table 1). However, research findings suggest that there is inconsistent evidence that IT investments lead to a significant increase in productivity. Research on the relationship between IT investment and firm performance can be classified into three categories: First, several researchers have asserted that there is no connection between IT investments and firm performance [11] and [12]. Rather, it is argued that IT investment could have a negative impact on the productivity of an organization because of inefficient allocation of management resources. Elasticity of other management activities (e.g., marketing, research and development (R&D), advertising) and other capital on firm performance are greater than the elasticity of IT capital [13]. In the worst case, as firms invest more in IT, there is a greater need for coordination between different activities and information systems across functional areas of the organization after installation of new information systems [14] and [15]. This so-called IT productivity paradox stimulated researchers to seek the reason for this phenomenon.

The second research group has asserted that a significant positive relationship between IT investment and firm performance exists. As firms invest more in IT, their performance correspondingly increases [16], [17], [18], [19], [20], [21], [22], [23], [24] and [25]. Various techniques and sample data were used to explain the positive relationship between IT investment and firm performance.

The third research group has reported partial or mixed results, and explained possible reasons for the results [9], [26], [27], [28], [29], [30], [31], [32], [33], [34] and [35]. It was reported that there is a positive relationship between IT investment and a range of firm performance variables; while in some performance variables, there is a negative relationship or effect.

To overcome this perplexing situation, many IT scholars have used more rigorous and scientific research frameworks: i) large-sample data sets [17] and [36], ii) inclusion of additional factors such as a time lag [18] and [29], the information-intensity of the industry [4], [24], [29], [30] and [37], iii) new methodology (e.g., structural equation modeling (SEM)) [25], and iv) new theories, such as a Resource-Based View (RBV) [4], [16] and [38]. These studies have revealed the positive effects, or at least mixed effects, of IT investment on firm performance.

The debate concerning the effects of IT investment on cost and efficiency-related performance has decreased according to the accumulated knowledge stock [29] and [39]. However, because these previous studies were based on the data from developed countries, particularly the United States [5], the findings and agreements cannot be simply generalized to apply to developing countries, which are different from developed countries in many aspects. There can be variation of macro-environments—such as productivity, economic growth [6], regulation levels [25], labor costs, IT skills' availability and heterogeneity [7], competition, complementary organizational innovations [40], culture [39] across countries. Such country characteristics can "create country-specific sets of IT attributes, and thereby impact firms' IT choices and resultant organizational performance impacts" [[8], p. 310]. For instance, if unit costs of labor are relatively cheaper than IT, as in the majority of developing countries, many firms may give priority to investing in labor rather than IT for similar business performance payoffs according to the microeconomics-based view [7]. Moreover, if there is a government subsidy or regulation for IT investment, as is often happening in developing countries, the effect of IT investment would be distorted [39]. Therefore, it cannot be said that the effects of IT investment in developing countries are similar to those in developed countries.

Event study methods have been used by some researchers to examine the short-term stock market reaction to IS. Hayes et al. (2001) and Ranganathan and Samarah (2003) estimate the stock market reaction to ERP implementation announcements based on samples of 91 and 136, respectively.These studies find statistically significant abnormal stock market returns ranging anywhere from 0.5% to 0.84%, indicating that the market reacts positively to IT investment announcements.

Dehning et al. (2004) has studied the financial benefits of SCM systems by analyzing objective data from a set of 123 firms (SIC Codes 2011-3999) who have chosen to implement or have implemented an SCM application. They find that that these systems generally are associated with improved financial performance. Unlike Poston and Grabski's (2001) analyses of ERP adoptions, Dehning et al. (2004) control for industry and economy-wide effects by using the median industry performance as benchmark. While this is certainly better than not using any controls, they do not control for prior performance as advocated by Barber and Lyon (1996). As mentioned earlier, this can confound the estimation and interpretation of abnormal performance. To the best of our knowledge we are not aware of any study that has rigorously analyzed the effect of CRM systems on performance

Hendricks et al. [10] examined the effect of firms'investments in Enterprise Resource Planning (ERP), Supply Chain Management (SCM), and Customer Relationship Management (CRM) systems on long-term stock price performance and various profitability measures, such as return on assets and return on sales. Their results provide evidence that the adoption ERP systems leads to significant improvements in the profitability, which are stronger in the case of early adopters of ERP systems, but not in the stock returns. Also, the adopters of SCM systems experience positive stock returns as well as improvements in profitability.On the contrary, there was no evidence of improvements in stock returns or profitability for firms that have invested in CRM.

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