Impact of information quality and decision-maker quality on decision quality: a theoretical model and simulation analysis

Abstract

The impact of information technology (IT) on firm performance is widely studied but little understood. A common perception is that IT improves the quality of information, which, in turn, improves decision quality and performance. Several studies of IT-performance relationship have used managers' perceived as opposed to actual performance. We investigate the impact of information quality and decision-maker quality on actual decision quality using a theoretical and a simulation model. We use accuracy as the measure of quality. Our analysis shows that, depending on the decision-maker quality, decision quality may improve or degrade when information quality improves. The decision quality improves with higher information quality for a decision-maker that has knowledge about the relationships among problem variables. However, the decision quality of a decision-maker that doesn't know these relationships may degrade with higher information quality. Simultaneous improvement in information quality and decision-maker quality results in higher decision quality. The simulation model, which relaxes some of the assumptions made by the theoretical model, yields similar results. We explain how our results supplement the results of prior studies of IT-performance relationship. Our results underscore the need for including decision-maker quality in the investigation of the IT-performance relationship and the importance of developing quality decision support tools.