IS Integration and Business Performance: The Mediation Effect of Organizational Absorptive Capacity in SMEs

Abstract

A fundamental result of the information technology (IT) and business performance literature is that IT is not a driver of performance per se. However, it can be associated with higher performance if accompanied by organizational change. The identification of the variables describing organizational change is still on-going work. This paper focuses on organizational absorptive capacity and analyses its effects on the relationship between IT and business performance in small and medium enterprises (SMEs). Organizational absorptive capacity measures the ability of an organization to complete a learning process. A significant learning effort is typically associated with IT, as it represents a complex technology. To cope with IT's complexity, implementation is typically incremental and is accompanied by a continuous integration effort of data and applications. The degree of integration of a company's information system (IS), called IS integration, is a proxy of IT maturity and quality. In this study, we explore the effect of IS integration on business performance through absorptive capacity, that is, we hypothesize that absorptive capacity has a mediation role between IS integration and business performance. The proposed research model is tested with data surveyed from 466 SMEs sited in Italy, for which exports constitute more than half of their revenues. Results indicate that organizational absorptive capacity has a mediation effect. Alternative models attributing to absorptive capacity a role different from mediation are found to be non-significant.

Customer Relationship Management and Firm Performance

“…Our conceptual model draws heavily on the strategy literature and the strategic necessity hypothesis in asserting that although IT is a necessary factor, it rarely, in-and-of-itself, generates sustainable performance advantages (Clemons and Row 1991). In other words, the business value that is generated by IT is dependent upon the combination of complementary technical, organizational and human resources (Francalanci and Morabito 2008). Figure 1 illustrates the proposed combination of lower-and meta-capabilities to explain hierarchically how CRM contributes to firm performance.…”

“…For example, Francalanci and Morabito (2008) identify that the link between information systems and firm performance is mediated by the absorptive capacity of the firm. Brynjolfsson and Hitt (1996) argue that the business value from IT is only generated when the IT is absorbed within the firm, as a routinized element of a company's value chain.…”

An integrated information system to support supply chain management & performance in SMEs

“…138 SMEs in Malaysia Inter-organizational relationships were affecting Malaysian SMEs' decision to adopt e-business in the supply chain The findings of both the contingency and configuration approach indicated that supply chain integration was related to both operational and business performance Söderberg and Bengtsson (2010) 15 SMEs in Sweden The results indicate that there is a strong relationship between SCM maturity and SC performance in SMEs and some relationships between SCM maturity and financial performance Tumaini and Zheng (2011) 229 SMEs in Tanzanian The study found that SMEs still face obstacles like knowledge, financial resources and technology IT integration is an important need for SMEs because IT integration will produce precise information that can improve firm efficiency, customer satisfaction, and firm productivity (Volkoff, Strong & Elmes, 2005;Berente, Vandenbosch & Aubert, 2009;Sampaio, Saraiva & Domingues, 2012;Francalanci & Morabito, 2008;Yen-Teoh & Pan, 2009;Simon & Petnji-Yaya, 2012). Thus, the more integrated the information system, the better the firm performance.…”

Does service innovation matter? An empirical study on market orientation and supply chain performance

“…This is supported by the study by Wolff and Pett (2006), who asserted that firms that innovate tend to have greater returns on investment. Moreover, according to their study of 466 SMEs in Italy, Francalanci and Morabito (2008) proposed that the integration of information systems might mediate firm absorptive capacity.…”