1

THE IMPACT OF INFORMATION TECHNOLOGY (IT) ON SUPPLY CHAIN

CAPABILITIES AND FIRM’S PERFORMANCE

1. Introduction. History of organizations doing business is as old as

the human civilizations. What constantly changing around the organizations
is the level of awareness of surrounding happenings. The awareness
enabled mangers of organizations to take informed decisions and avoid
errors. IT is a tool of 21 st century which has revolutionized the level of
awareness of managers to become extremely competitive and profitable in
today’s world. Though true impact of IT on a Firm’s performance is yet to be
known keeping in view the role it has played during current “Covid-19”
pandemic environment, however opportunity is on the way for an in-depth
analysis of IT on a firm performance from a number of perspectives.
2. In today’s world not even, an illiterate person can deny the magic of IT
while holding a smart phone in his hand. Significance of IT in relation to a
firm’s performance therefore has a universal acceptance. Without which an
organization is most likely will be out of business very soon.
3. Objective of this research paper is to identify those dimensions of IT
which have not been yet explored but have a direct bearing on the
performance and functioning of a firm. Recent study on the issue reveals that
there remain many research areas that previously could not address
satisfactorily (kim, 2016).
4. Literature Review
a. General Introduction
(1) General agreement to of IT exists, however it has been
observed in practice that IT is not used by all organizations
besides status quo to continue old practices and experiences
also becomes hindrance in the way to prosperity and
enhanced profitability of many organiations. This leads us to
analyse some of the basics variables including IT utilization,
internal IT integration, external IT integration and
management commitment to IT for supply chain management,
among others, are possible IT-related resources that deserve
further research attention.
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(2) Performance of a Firm. A firm’s performance is an

achievement or results obtained by management, economics,
and marketing in providing competitiveness, efficiency, and
effectiveness to the company Taouab & Issor, 2019). The
term is also used as a general measure of a firm's overall
financial health over a given period. The business
performance or company performance is part of an
organization's effectiveness which includes operational and
financial results. The definition of company performance in the
decade of the 21st century focuses on how companies make
efficient resources to consistently improve capabilities and
abilities to achieve company goals (Taouab & Issor, 2019).
(3) IT utilization. IT refers to techniques used in business for
transmitting, storing, manipulating and retrieving all kinds of
data, including speech, text, movie, graphics and reports of
events such as equipment malfunction, intrusion etc.
Typically, Information Technology relates to the hardware and
software that businesses use to manage and operate a range
of business processes. Most businesses network their
computers so that information can be shared.
(4) Internal IT integration. Organizational integration can be
defined as the extent to which distinct and interdependent
organizational components rapidly and adequately respond
and/or adapt to each other while pursuing common
organizational goals (Barki and Pinsonneault, 2005, Lawrence
and Lorsch, 1967) IT Integration includes the advancement
and reconfiguration of information technology (IT) to bolster
business systems.
(5) External IT integration. External integration refers to
the degree to which a firm can partner with its key supply
chain members (customers and suppliers) to structure their
inter-organizational strategies, practices, procedures and
behaviors into collaborative, synchronized and manageable
processes in order to fulfill customer requirement.
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(6) Management commitment to IT. Top management has a

vital role to play in implementation of IT regime in the firm.
Management has to display not only the commitment but also
concrete actions to complete the change.

5. Theoretical Framework
a. Relationship between IT utilization and Firm’s Performance
(1) Recently there has been growing recognition of the
importance of assessing information technology (IT) assets in
determining a firm's competitive health and capacity for future
business performance. Increasingly, managers, consultants,
and financial analysts are considering a firm's IT resources
and capabilities in determining its future viability.
(2) For example, it is reported that analysts at Solomon Brothers
concluded that IT capabilities were an important differentiator
for banks that were doing well in the mid-1980s, as compared
to those that were less profitable (Nolan 1994). As a first step
towards examining the relationship between IT investments
and a firm's future performance potential and with a view to
avoiding some of the problems associated with the accounting
measures, we use Tobin's q measure of firm performance as
our dependent variable.
(3) Analysis shows that IT utilization is positively related to the
Firm’s performance.
b. Relationship between Internal IT integration and Firm’s
Performance
(1) Increasingly, information technology is used to facilitate
internal coordination within a firm and enhance decision
making among supply chain members (Li et al., 2005). In
practice, the widespread nature of this phenomenon is
evidenced by the increased use of information systems (IS)
for integration purposes, including information systems
infrastructure (e.g., data communication tools, network
connection, standard data structure, unified coding
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standards), information systems software (e.g., enterprise-

wide information systems such as SAP), and information
systems applications (e.g., centralized database management
systems, electronic data interchange (EDI), web-based or
internet-based information systems) (Kumar, 2014).
(2) Parallel to the increased IS integration, the research on its link
to firm profitability has been the subject of considerable and
enduring interest among IS researchers and practitioners.
Prior studies suggest that organizations should realize greater
profitability as IT resources are increasingly integrated
(Weiner et al., 2004; Simoens and Scott, 2005). However, the
limited number of empirical studies that has attempted to test
the relationship between IS integration, such as enterprise
resource planning (ERP), and firm profitability has
demonstrated the complex nature of this relationship.
(3) Therefore, internal IT integration will increase a Firm’s
performance.
c. Relationship between External IT integration and Firm’s
Performance
(1) External IT integration is the degree to which a firm's IT is
compatible with that of other firms, such as customers and
suppliers. We draw on the operations management,
information systems, management accounting, and marketing
literature to assess whether internal and external IS
integration has a significant direct impact on firm profitability.
(2) Various surveys and firms profitability data show that external
IT integration is positively related to the Firm’s performance.
(3) External IT integration is positively related to a Firm’s
performance.
d. Relationship between Management commitment to IT and
Firm’s Performance
(1) Organizational performance and organizational excellence
are the main two focuses of the management of any
organization. In fact, the resources of an organization, either
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tangible or intangible, can distinguish the level of performance

of one organization from its rivals. The question always is
what are the key success factors that can enhance the
organizational strategy implementation initiatives to produce
value and create the competitive advantage. In today’s
changing business environment, improvement and
development of internal resources are very crucial to compete
externally and globally.
(2) The management has a mediating role in implementing the
regime of information technology in firm. If management is
not robust and future oriented then it will adversely affect the
performance of firm and not utilizing information technology.

Moderating Dependent
Independent
Variable Variable
Variables

Management
commitment
to IT

IT
Utilization
(+)

(+) Firm’s
Internal IT
Performanc
integration
(+) e

External IT
integration

Figure 5.1 Schematic diagrams of Independent Variables on Firm’s performance

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6. Hypothesis Development. Based on the above below are the

research hypotheses: -
a. H1 : IT utilization has positive significant impact on firm’s
performance
b. H2 : Internal IT integration has positive significant impact on firm’s
performance
c. H3 : External IT integration has positive significant impact on firm’s
performance
d. H4 : Management commitment to IT moderates relationship of IT
utilization on firm’s performance
e. H5 : Management commitment to IT moderates relationship
Internal IT integration on firm’s performance
f. H6 : Management commitment to IT moderates relationship of
External IT integration on firm’s performance
7. Research Methodology.
a. Overview. In this study, we examine the role of management
in the planning and implementation of a particular technology.
Questionaries were designed to gauge the effects of various
variable on the performance of firm. Thereafter data analysis was
carried out to test the hypothesis. A review of past research on
SCM also indicates that there have been variations in measuring
competitive advantage stemming from SCM of organizations.
b. This study adopted a pragmatist philosophical approach.
Pragmatism is based on the premise that theories and models are
judged primarily by their practical results (McDermid, 2006).
Pragmatism underpins mixed research methodology; essentially
the combination of qualitative and quantitative approaches. It
blends the philosophical assumptions and approaches from both
qualitative and quantitative research methods (Creswell, 2009).
c. Research Design. Research design is based on quantitative
research for which structured questionnaire was designed and
respondents were selected from the dynamic companies who were
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in either in transition of completed conversion from manual to IT

systems.
d. Population and Sampling. The target population of for the study
consists of all Commercial Banks, Micro Finance Institutions/Banks
(MFI) in Rawalpindi and Islamabad.
e. Questionnaire. The questionnaire contained questions
relating to IT utilization, Internal IT integration, external IT
integration and Management commitment to IT. Questionnaires
was based on well tested questionnaire like Allen and Myers
Organizational commitment questionnaire (OCQ). Dockel (2001)
used similar questionnaire to find out the Organizational
Commitment in high technology employees in South Africa. The
questionnaire with some modifications as per local requirements of
Pakistan was used. Since the questionnaire was successfully used
in previous studies and well tested by researchers on internal
consistency and other measures hence in the present study the
same questionnaire was used to test the level of organizational
commitment in Pakistani IT sector professionals. Participants had
to indicate their agreement with each item on five point Likert
scales (endpoints: 1= strongly disagree, 5 =strongly agree).
Questionnaires were printed and given to the heads of the
respective human resources departments of each organization.
Participation was anonymous to have an impartial opinion. The
questionnaires were accompanied by a covering letter explaining
the confidentiality and importance of this research.
f. Respondents and Firm Profile. The final sample included 6
Top level managers (30 %), 8 middle level managers (40 %) and 6
low level managers (30 %). The respondents worked primarily for
medium to large firms. In general, with respect to the annual sales
volume, the respondents were evenly distributed among the
different groups.
g. Data Collection. Data collection refers to the process of
gathering raw and unprocessed information that can be processed
into meaningful information, following the scientific process of data
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analysis (Gall, Gall and Borg, 2007). Primary data was collected
for this study. Data was collected or obtained from the original
sources. It is firsthand information collected by an individual group
or organization. Structured questionnaire was used to collect
primary data. The questionnaire was structured into personal
profile of the respondents, organizational profile and information
addressing research questions. The questionnaire was
administered to one Senior IT Executives of the selected
institutions. It was dropped and picked later by trained research
assistants. A five-point type Likert scale ranging from 5 - denoting
to a greater extent to 1 - denoting to a less extent was used.
h. Scale. The demographic factors of the selected respondents
were analyzed with the help of nominal scale.
i. Analysis and findings. The tests of hypotheses were
performed and the results presented on the relationships between
IT utilization and firm performance; Internal IT integration and firm
performance; and external IT integration and firm performance.
Also tested and presented are the results of the effect of
Management commitment to IT on the relationship between IT
utilization, Internal IT integration, and external IT integration on firm
performance.
Table 1. Summary of Hypotheses Testing
ser Objective Hypotheses Results Remarks
on
hypotheses
1. To establish the H1 : IT utilization T = 1.236 Not
relationship between has positive accepted
IT utilization and firm significant impact on
performance firm’s performance
2. To establish the H2 : Internal IT T = -1.795 Not
relationship between integration has accepted
Internal IT integration positive significant
and firm performance impact on firm’s
performance
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ser Objective Hypotheses Results Remarks

on
hypotheses
3. To establish the H3 : External IT Not
relationship between: integration has accepted
External IT integration positive significant
T = .805
and firm performance impact on firm’s
performance

4. To evaluate the H4 : Management Accepted

influence of commitment to IT
Management moderates
commitment to IT on relationship of IT T = 5.562
the relationship utilization on firm’s
between IT utilization performance
on firm’s performance
5. To evaluate the H5 : Management Accepted
influence of commitment to IT
Management moderates
commitment to IT on relationship Internal
T = 5.562
the relationship IT integration on
between internal IT firm’s performance
Integration on firm’s
performance
6. To evaluate the H6 : Management Accepted
influence of commitment to IT
Management moderates
commitment to IT on relationship of
T = 5.562
the relationship External IT
between external IT integration on firm’s
Integration on firm’s performance
performance

j. Descriptive Analysis. Interest in information technology

has grown continuously among management practitioners and
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academics. The research conducted to date has built a solid

foundation regarding the importance of information technology for
the supply chain. However, there is currently a gap in the empirical
literature in respect to the negative influences of information
technology on supply chain performance. Some papers address
risks and problems resulting from humans working with information
technology such as lack of controls and knowledge among
managers, nevertheless clearly stated disadvantages are rarely
found. This is not surprising as information technology at the
moment contributes high value for companies. For the reason that
current literature concentrates heavily on the positive aspects of
information technology on supply chain performance this paper will
take a balanced look at both sides.
k. Due to limitations of scope the focus of this paper will be on the
most prevailing influences addressed in literature. Additionally,
there are articles talking about the potential risks and challenges
regarding the high investment and complimentary investments.
Lastly some papers take a broader view and talk about competitive
advantage or firm performance, while others include information
technology only as a partial area in the study and analyzed for
example besides information also material and financial flows.

Frequencies
Statistics

Age Education Experie Level of

nce management
Valid 20 20 20 20
N Missin
0 0 0 0
g

Age
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Frequency Percent Valid Cumulative

Percent Percent
18 - 25 4 20.0 20.0 20.0

26 -33 6 30.0 30.0 50.0

34 - 41 5 25.0 25.0 75.0

Valid
42 - 49 4 20.0 20.0 95.0
Above 50
1 5.0 5.0 100.0
Years
Total 20 100.0 100.0
Education
Frequency Percent Valid Cumulative
Percent Percent
matriculation 1 5.0 5.0 5.0
intermediates 5 25.0 25.0 30.0
Valid graduation 8 40.0 40.0 70.0
master 6 30.0 30.0 100.0
Total 20 100.0 100.0

Experience
Frequency Percent Valid Cumulative
Percent Percent
less than
3 15.0 15.0 15.0
one year
1 - 5 years 4 20.0 20.0 35.0
6 - 10 years 7 35.0 35.0 70.0
Valid 11 - 15
3 15.0 15.0 85.0
Years
Above 15
3 15.0 15.0 100.0
Years
Total 20 100.0 100.0

Level of Management

Frequenc Percent Valid Cumulative

y Percent Percent
Valid Top Level 6 30.0 30.0 30.0
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Middle
8 40.0 40.0 70.0
level
Low level 6 30.0 30.0 100.0
Total 20 100.0 100.0
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Descriptive Statistics
N Minimu Maximu Mean Std.
m m Deviation
ITU 20 2.50 4.50 3.5625 .78168
IITI 20 1.75 4.75 3.2000 .97872
MCITIT 20 1.50 4.25 2.8250 .83153
FP 20 1.25 4.25 3.0250 1.10293
Valid N
20
(listwise)
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l. Correlation matrix. The correlation matrix measures the

relationship between different variables. The matrix at Correlation
Table shows extent of relationship between the independent
variables and the dependent variable, i.e., Firms’ performance.
Correlations
ITU IITI MCITIT FP
Pearson
1 .937** .817** .574**
Correlation
ITU
Sig. (2-tailed) .000 .000 .008
N 20 20 20 20
Pearson
.937** 1 .817** .629**
Correlation
IITI
Sig. (2-tailed) .000 .000 .003
N 20 20 20 20
Pearson
.817** .817** 1 .859**
MCITI Correlation
T Sig. (2-tailed) .000 .000 .000
N 20 20 20 20
Pearson
.574** .629** .859** 1
Correlation
FP
Sig. (2-tailed) .008 .003 .000
N 20 20 20 20
**. Correlation is significant at the 0.01 level (2-tailed).

m. Regression Analysis

Variables Entered/Removeda
Mode Variables Variables Method
l Entered Removed
MCITIT,
1 . Enter
IITI, ITUb
a. Dependent Variable: FP
b. All requested variables entered.
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Model Summary
Mode R R Adjusted R Std. Error of
l Square Square the Estimate
1 .891a .795 .756 .54466
a. Predictors: (Constant), MCITIT, IITI, ITU

ANOVAa
Model Sum of df Mean F Sig.
Squares Square
Regression 18.366 3 6.122 20.637 .000b
1 Residual 4.746 16 .297
Total 23.113 19
a. Dependent Variable: FP
b. Predictors: (Constant), MCITIT, IITI, ITU

Coefficientsa
Model Unstandardized Standardize t Sig.
Coefficients d
Coefficients
B Std. Error Beta
(Constan
.846 .685 1.236 .234
t)
1 ITU -.852 .475 -.604 -1.795 .092
IITI .305 .379 .271 .805 .433
MCITIT 1.500 .270 1.131 5.562 .000
a. Dependent Variable: FP
n. Reliability Analysis
Scale: ALL VARIABLES

Reliability Statistics
Cronbach's N of
Alpha Items
.920 4

Case Processing Summary

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N %
Valid 20 100.0
a
Cases Excluded 0 .0
Total 20 100.0
a. Listwise deletion based on all variables in
the procedure.

o. Control Variables

Oneway

ANOVA
FP
Sum of df Mean F Sig.
Squares Square
Between
3.788 4 .947 .735 .582
Groups
Within Groups 19.325 15 1.288
Total 23.113 19

ANOVA
FP
Sum of df Mean F Sig.
Squares Square
Between
9.444 3 3.148 3.685 .034
Groups
Within Groups 13.669 16 .854
Total 23.112 19
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ANOVA
FP
Sum of df Mean F Sig.
Squares Square
Between
11.273 4 2.818 3.571 .031
Groups
Within Groups 11.839 15 .789
Total 23.113 19

ANOVA
FP
Sum of df Mean F Sig.
Squares Square
Between
17.435 2 8.718 26.105 .000
Groups
Within Groups 5.677 17 .334
Total 23.112 19

p. Data Analysis
(1) Frequencies
(a) Age. 20 % respondents fall in age bracket of
18 – 25 years, 75 % from 25 – 50 years and remaining
5 % are above 50 years. Total 20 correspondents
participated.
(b) Education. 30 % respondent fall in category of matric
to intermediate and remaining 70 % are above
intermediate.
(c) Experience. 70 % respondents have experience
in firm from period starting from less than a year to 10
years and remaining 30 % have more than 10 years.
(d) Level of Management. It includes 30 % top level,
40% and remaining 30 % are low level managers.
(2) Descriptive Analysis. More respondents agreed with
regard to positive impact of IT Utilization and Internal IT
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Integration on Firm’s performance, however less number of

respondents agreed to Management Commitment to IT.
(3) Correlation Analysis. Correlation between variables is
significant.
(4) Regression Analysis. Hypothesis from H1 to H3 are
not accepted where t = -1.7 and 0.8, however Hypothesis
from H4 to H6 are accepted where t = 5.562 explaining
moderating role of management on effect of IT Utilization,
internal IT integration and external IT integration no firm’s
performance. Moreover, moderating role of management
commitment to IT is significant at 0.000 and insignificant for IT
Utilization and Internal IT integration at significance level of 0 .
092 and 0.433.
(5) Reliability Analysis. Reliability analysis was valid at
100%.
(6) Control Variables. It was insignificant for IT Utilization at
significance level 0.582, significant for Internal IT integration
at 0.034, significant for external IT integration at 0.031 and
management commitment to IT at 0.000.
8. Limitations and future research. Several limitations of this
study need to be addressed in future research. first, the study framework was
tested primarily with a single informant from each organization. A dataset with
multiple informants from each organization can enhance the validity of the
findings. Second, this study used perceived measures of market and financial
performance by top managers only, in future financial manager be involved in
this. Future work can attempt to blend in objective data in an effort to validate
the findings.
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References

Taouab & Issor, (2019), Management, economics, and marketing in providing

competitiveness, efficiency, and effectiveness to the company.

Taouab & Issor, (2019). How companies make efficient resources to consistently
improve capabilities and abilities to achieve company goals.

Li et al., (2005) Internal coordination within a firm and enhance decision making
among supply chain members

Kumar, (2014). Web-based or internet-based information systems.

Creswell, (2009) Qualitative and quantitative research methods.

Gall, Gall and Borg (2007). Scientific process of data analysis

Appendix A. Questionnaire

Gender: Male Female

Age: Education:

 18 -- 25 years  Matriculation

 26 -- 33years  Intermediate

 34 -- 41 years  Graduation

 42 -- 49 years  Masters

 Above 50 years  Others

 Others

Experience:  1 – 5 years

 Less than One year  6 -- 10 years

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 11 -- 15 years  Middle level

evel of Management:  Low level

 Top level

 Above 15 years
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INSTRUCTIONS

 Please mark only one option.

 Please fill the survey form provided and hand it back to us.
 The accuracy depends upon the truthfulness of your answers.

1 2 3 4 5

Strongly Disagree Disagree to Uncertain Agree to Strongly Agree

some Extent some Extent

Using the scale shown above, rate your response with the following aspects of
your Company.

IT Utilization:

Q. 1: I believe that IT utilization is beneficial for my company.

1 2 3 4 5

Q. 2: IT Utilization is in progress in my company.

1 2 3 4 5

Q. 3: Some old employee resist IT Utilization in my company.

1 2 3 4 5

Q. 4: IT Utilization will be completed in shortly.

1 2 3 4 5

Internal IT integration:
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Q. 1: I believe internal IT integration should be done in all departments of company.

1 2 3 4 5

Q. 2: Internal IT integration will lead to business growth.

1 2 3 4 5

Q. 3: Internal IT integration is priority of my company.

1 2 3 4 5

Q.4: Internal IT integration will help better working environment.

1 2 3 4 5

External IT integration:

Q.1: I believe external IT integration should be done with all relevant companies.

1 2 3 4 5

Q.2: External IT integration will lead to business growth.

1 2 3 4 5

Q.3: External IT integration is priority of my company.

1 2 3 4 5
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Q.4: External IT integration will help better working environment.

1 2 3 4 5

Firm’s Performance:

Q.1: I believe use of IT has profound bearing on the performance of my company.

1 2 3 4 5

Q.2: Use of IT has enhanced the performance of my company.

1 2 3 4 5

Q.3: IT has increase firm’s performance by entering into new markets.

1 2 3 4 5

Q.4: Firm’s performance has been increased by helping manager in execution of

tasks.

1 2 3 4 5

Management Commitment to IT :

Q.1: Management of my firm is committed to use of IT in the firm.

1 2 3 4 5
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Q.2: Management has allocated enough budget for IT equipment.

1 2 3 4 5

Q.3: Management has plans for training of staff for use of IT.

1 2 3 4 5

Q.4: Management is satisfied with the speed of implementation of IT in the

company.

1 2 3 4 5

Thanks for your cooperation