Does information technology improve coordination? An empirical analysis

With the use of information technology (IT), organizations radically redesign their business processes and improve their business profitability and productivity. Previous information systems (IS) research has investigated whether or not IT improves business profitability and productivity. However, most of the previous studies failed to consider any contextual or moderating factors that might affect firm performance and productivity. Because it is intangible and intermediate benefits, e.g. better coordination, quality improvement, increased variety, and innovation, complicate the justification process for IT investments, this paper empirically examines the direct relationship between IT and coordination. The results of this study clearly show that IT spending is strongly associated with a decline in coordination costs. From the results, it can be inferred that IT enhances coordination of economic activities by reducing coordination costs, and thereby can improve firm performance and productivity. This paper appears in the Proceedings of the 3rd Americas Conference on Information Systems in a three-page summary under the title, “Empirical evidence on the impact of information technology on coordination costs”. significant reduction in coordination costs. Our findings imply that IT enhances coordination of economic activities (intangible benefit) by reducing coordination costs, and thereby can improve firm performance and productivity (tangible benefit). The remainder of this paper is organized as follows. In the following section, we present the background for the theoretical speculation on the relationship between IT and coordination (costs). Then, we describe the methodology, data used in the study, and variable construction, and present a model. In the next section, we present the results and discuss on the implications of the results. Our concluding remarks are provided in the final section.