The effects of EDI usage on production performance through the changes of management control systems

Abstract

This study empirically investigated and demonstrated changes of management control systems (MCSs) when electronic data interchange (EDI) is adopted and utilised. Using structural equation modelling, causal relationships among environmental uncertainty affecting EDI adoption, EDI usage, organic forms of MCSs and production performance were confirmed. This study also empirically showed the mediating effects of individual elements of MCSs on the relationship between EDI usage and production performance. The results presented that environmental uncertainty is a primary cause factor for the adoption of EDI. According to the results of this study, it was found that under high degrees of EDI usage, forms of MCSs become organic (i.e. characterised by decentralised structure, high degree of integration, decentralised communication and team-based rewards), and that both the high usage of EDI and the organic types of MCSs have a positive impact on production performance of a firm. However, it seems that because of the information effects of EDI, a highly formalised structure and formula-based performance evaluation are required when using EDI.