A Data Envelopment Analysis Approach to Estimate IT-Enabled Production Capability
Sezgin Ayabakan, Indranil R. Bardhan, Zhiqiang (Eric) Zheng
Abstract
Information systems researchers have drawn on the resource-based view (RBV) and dynamic capabilities theory to offer a sharper theoretical lens to study the impact of information technology (IT) enabled capabilities on organizational performance. In this study, we proposed a new conceptualization of IT-enabled production capability, based on a manufacturing plant’s ability to use its mix of resource inputs to maximize its process outputs. Our approach extended the literature on firm capability using data envelopment analysis (DEA), a non-parametric approach for estimating relative efficiencies of decision-making units. We tested our models using plant-level data collected from a sample of U.S. plants. Our study makes a key contribution by developing a new methodology to measure IT business value with respect to the role of IT-enabled production capability. We operationalized a new DEA-based measure of capability using the relative efficiency of converting plant inputs into process outputs, a significant departure from extant research that had primarily focused on subjective and absolute measures to conceptualize capability.
MIS Quarterly, 41:1, pp. 189-205, March 2017