A Data Envelopment Analysis Approach to Estimate IT-Enabled Production Capability

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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 propose a new conceptualization of IT-enabled production capability, based on the ability of a manufacturing plant to use its mix of resource inputs to maximize its process outputs. Our approach extends the literature on firm capability using data envelopment analysis (DEA), a nonparametric 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 operationalize 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 has primarily focused on subjective and absolute measures to conceptualize capability.


Additional Details

Author Sezgin Ayabakan, Indranil R. Bardhan, and Zhiiang (Eric) Zheng
Year 2017
Volume 41
Issue 1
Keywords Production capability, data envelopment analysis, efficiency, resource-based view, information technology
Page Numbers 189-205; DOI: 10.25300/MISQ/2017/41.1.09