Does information technology improve coordination? An empirical analysis

With the use of information technology (IT), organizations radically redesign their business processes and improve their business profitability and productivity. Previous information systems (IS) research has investigated whether or not IT improves business profitability and productivity. However, most of the previous studies failed to consider any contextual or moderating factors that might affect firm performance and productivity. Because it is intangible and intermediate benefits, e.g. better coordination, quality improvement, increased variety, and innovation, complicate the justification process for IT investments, this paper empirically examines the direct relationship between IT and coordination. The results of this study clearly show that IT spending is strongly associated with a decline in coordination costs. From the results, it can be inferred that IT enhances coordination of economic activities by reducing coordination costs, and thereby can improve firm performance and productivity.