Multilevel Synergy of Information Technology for Operational Integration: Competition Networks and Operating Performance

Abstract

Firms’ multilevel access to information plays a significant role in improving operating performance. Increasingly, firms are enhancing their operational integration through information technology (IT) as they grapple with intense competition. Competition networks are an essential but often overlooked source of information that, if leveraged correctly, can provide firms with significant competitive and operational advantages. In this study, we develop a multilevel research model of operating performance (firm level) that simultaneously considers the effects of IT for operational integration (ITOI, firm level) and competitive brokerage (competition network level). We explicate how ITOI and competitive brokerage afford firms’ synergy through complementarities and relatedness of competitive actions, information, and resources to improve their operating performance. We assess the model using a 7-year longitudinal secondary data set that includes firms from multiple industries and find support for our thesis that ITOI and competitive brokerage have a synergistic effect on operating performance. Our exploratory analysis uncovers innovation efficiency as a theoretical mechanism underlying the relationships between ITOI, competitive brokerage, and operating performance. Further exploratory analyses with disaggregated measures of ITOI highlight that synergies arise from IT-enabled coordination and integration across the supply chain and within functional areas of an organization. These findings are robust to concerns of endogeneity and alternative model specifications. We make three critical contributions to our collective understanding of the relationship between IT and operating performance—synergy as a means through which operating performance is realized, a multilevel model of relationships, and a nuanced understanding of the relationships between ITOI, competitive brokerage, and operating performance. Overall, we provide a summative view of the multilevel effects of IT on operating performance.