Information Systems Integration and Firm Profitability: Mediating Effect of Cost Management Strategy
Advances in Management Accounting
ISBN: 978-1-78441-650-8, eISBN: 978-1-78441-649-2
Publication date: 17 July 2015
Abstract
Purpose
The purpose of this study is to assess (a) the relationship between internal and external IS integration and their respective impacts on internal and external cost management strategies, (b) the relationship between internal and external cost management strategies, and (c) the effects of internal and external cost management strategies on profitability, controlling for firm size. Furthermore, this study investigates whether internal and external IS integrations produce direct significant effects on firm profitability or whether these relationships are established through cost management strategies.
Methodology/approach
The study uses survey data from a cross-section of 241 U.S. manufacturing firms. Data were analyzed using structural equation modeling.
Findings and implications
The results indicate that neither internal IS integration nor external IS integration has a direct significant impact on firm profitability. Rather, internal cost management strategy fully mediates the relationship between internal IS integration and profitability; similarly, the relationship between external IS integration and profitability is fully mediated through external cost management strategy. The results provide evidence that firms seeking profitability solely by investing in IS integration may not necessarily realize enhanced profitability; the firms must focus their attention on intervening processes, such as business strategy, in order to determine the profitability derived from IS integration.
Originality
As far as it can be ascertained, this study is the first to explore the impact of internal and external IS integration on firm profitability within the context of internal and external cost management strategies.
Keywords
Citation
Maiga, A.S. (2015), "Information Systems Integration and Firm Profitability: Mediating Effect of Cost Management Strategy", Advances in Management Accounting (Advances in Management Accounting, Vol. 25), Emerald Group Publishing Limited, Leeds, pp. 149-179. https://doi.org/10.1108/S1474-787120150000025004
Publisher
:Emerald Group Publishing Limited
Copyright © 2015 Emerald Group Publishing Limited