Performance impacts of information systems use: Is competitive action a missing link?

The use of information systems for competitive advantage has been the topic of much writing and research. As a successful example, American Airlines’ aggressive use of its computer-based reservation system, SABRE, has often been cited for improving operational efficiency, increasing organizational flexibility, and altering interorganizational relationships. Yet, little attention has been given to a series of competitive actions that were generated through the use of SABRE along its evolutionary trajectory. These competitive actions enabled American to disrupt competitive forces and remain as a market leader in the airline industry for decades. Stimulated by American’s case and today’s widespread use of IS, this study asks two interesting questions: Is there a systematic link between IS use and competitive action? If so, how do they relate to each other? In addressing these questions, we integrate competitive dynamics research and organizational information processing theory to examine the roles of IS in influencing firm behavior and resultant performance. Collecting second-hand data from multiple sources, this study empirically investigates competitive action and IS use of nine major automakers in 2003. Results from this study suggest a strong link between IS use and competitive action. Specifically, greater IS use is strongly associated with undertaking more competitive actions and with greater heterogeneity of competitive actions; in other words, a firm with an extensive IS use is likely to undertake fast competitive moves in an innovative manner. This study makes multiple contributions to IS theory. It introduces a unique perspective by conceptualizing competitive behavior as being significantly influenced by IS use. It makes explicit the IS use-competitve action-firm performance link. Establishing this link introduces a new, measurable way to examine the effects of IS use on firm performance. To IS methodology, this study represents a pioneering effort at collecting second-hand data about actual, voluntary IS use. To IS practice, results from this study inform strategists and IS managers to focus on aggressive pursuit of new possibilities for performance improvement via IS for achieving competitiveness.