Assessing the relationships among information systems integration, coordination cost improvements, and firm profitability

Abstract

This paper used a survey questionnaire approach to obtain results about the roles of bonding cost improvement, internal monitoring cost improvement and external transaction cost improvement in mediating the impacts of internal and external information systems (IS) integration on firm profitability. Results indicate that internal IS integration is significantly associated with external IS integration. Both bonding and internal monitoring cost improvements are significantly impacted by internal IS integration, while external transaction cost improvement is impacted by external IS integration. All three cost improvements are significantly associated with firm profitability. The effect of internal IS integration on firm profitability is mediated through both bonding and internal monitoring cost improvements. Similarly, the effect of external IS integration on firm profitability is mediated through external transaction cost improvement. Furthermore, the link between internal IS integration and profitability is mediated through external IS integration and external transaction cost improvement.