Using structural equation modelling for investigating the impact of e-business on ICT and non-ICT assets, processes and business performance

Abstract

This paper investigates the impact of adopting an e-business strategy on two organizational characteristics which have gradually become highly important for organizations in the last 20 years, information and communication technology (ICT) assets and business processes, and also on a ‘traditional’ one, the non-ICT (regular) assets, and finally through them on business performance. Its theoretical foundations are the Contingency Theory of Organizations in combination with the Cobb-Douglas Production Function. Advanced quantitative techniques of structural equation modelling (SEM) have been employed, which allow the estimation of complex multi-layer models including mediator variables that are both dependent (i.e. affected by others) and independent (i.e. affecting some others) at the same time, and enable the investigation of complex networks of relationships. Firm-level data collected through a survey of 271 Greek firms have been used for estimating a SEM connecting the above variables. The results show that the adoption of e-business strategy by Greek firms leads to adaptation of their business processes, which has a positive impact on their business performance, but not to additional investment to ICT or non-ICT assets. In particular, e-business drives Greek firms’ processes adaptations aiming mainly to increase the non-hierarchical decentralized coordination within the firm, in order to cope with the higher task complexity and uncertainty that e-business gives rise to, and also to respond to the specific technical and operational requirements that this strategy poses.