STRATEGIC MANAGEMENT

Strategic Management and Information Systems

Strategic Management and Information Systems

1. Introduction

The enhanced competition in the private and public sector has spurred organizations into delivering greater efficiency, quality and more flexibility of services (Kaul, 1997). This condition imposes additional demands on the organization's information processing capabilities. In trying to achieve these strategic objectives, organizations adopt more sophisticated and comprehensive management information systems (MISs) ([Choe, 1996] and [Ghorab, 1997]). These provide top managers with a comprehensive and broad range of information about multiple dimensions of the firm's operations ([Choe, 1996] and [Choe, 2004]), facilitating decision-making and performance achievement (Kaplan & Norton, 1996; Kim & Lee, 1986). Organizations, however, differ in the extent to which they achieve strategic performance successfully. This paper addresses the relationship between sophisticated MIS and top management teams (TMTs), as the set of managers ultimately responsible for strategy management and organizational performance. Management literature has recognized that TMTs with different demographical characteristics (e.g. age, tenure, experience and education) are generally expected to gather diverse information and display higher-quality decisions (Carpenter, Geletkanycz, & Sanders, 2004; Finkelstein & Hambrick, 1996). Management and information literatures have recognized (implicitly) the use of information by managers, and the question that remains is how (explicitly) different top managers use MIS for strategic management (Lin, 2006; Hagan, Watson & Barron, 2007).

Although the effect of MIS on performance is widely recognized, prior findings on the direct and indirect relationship between and (strategic) performance far are mixed and confused (Fuller-Love & Cooper, 1996; Choe, 2004). The present study attempts to provide some clarification of the relationship between MIS design and strategic performance, by explicitly analyzing the role of TMT composition. Our general hypothesis is that diversity of TMT composition supports more sophisticated MIS in ways that contribute to multiple strategic performance, which are focused on cost control and flexibility (Gupta & Govindarajan, 1984; Lederer & Smith, 1989). We follow upper echelon literature, which views organizations as a reflection of their TMT (Hambrick & Mason, 1984). Upper echelon theory focuses on observable, demographic characteristics of TMT members to explain organizational outcomes (Finkelstein & Hambrick, 1996). This study also uses a contingency approach for analyzing the interaction fit between MIS sophistication and TMT composition. Contingency approach is the only one which asserts that performance depends on the existence of an alignment between several organizational characteristics, such as information systems, organizational structure and strategy (Choe, 1996; Kim & Lee, 1986).

2. Theoretical development and hypotheses formulation

2.1. MIS and strategic performance

Managers operating in competitive contemporary environments need comprehensive information in order to manage the important parts of the organization's operations and thus achieve different strategic goals (Kaplan & Norton, 1996). Managers' perception is an important factor that influences the actual use of MIS and the acceptance of new information systems (Ghorab, 1997, p. 250). MIS can provide managers with a variety of information, thus Choe (1996) identified MIS design according to the perceived usefulness of four information dimensions: scope, aggregation, integration and timeliness (Chenhall & Morris, 1986; Choe, ...