IS Integration and Business Performance: The Mediation Effect of Organizational Absorptive Capacity in SMEs

Abstract

A fundamental result of the information technology (IT) and business performance literature is that IT is not a driver of performance per se. However, it can be associated with higher performance if accompanied by organizational change. The identification of the variables describing organizational change is still on-going work. This paper focuses on organizational absorptive capacity and analyses its effects on the relationship between IT and business performance in small and medium enterprises (SMEs). Organizational absorptive capacity measures the ability of an organization to complete a learning process. A significant learning effort is typically associated with IT, as it represents a complex technology. To cope with IT's complexity, implementation is typically incremental and is accompanied by a continuous integration effort of data and applications. The degree of integration of a company's information system (IS), called IS integration, is a proxy of IT maturity and quality. In this study, we explore the effect of IS integration on business performance through absorptive capacity, that is, we hypothesize that absorptive capacity has a mediation role between IS integration and business performance. The proposed research model is tested with data surveyed from 466 SMEs sited in Italy, for which exports constitute more than half of their revenues. Results indicate that organizational absorptive capacity has a mediation effect. Alternative models attributing to absorptive capacity a role different from mediation are found to be non-significant.