International Journal of Information Management 47 (2019) 168–182

Contents lists available at ScienceDirect

International Journal of Information Management

journal homepage: www.elsevier.com/locate/ijinfomgt

Information system capabilities and firm performance: Opening the black T

box through decision-making performance and business-process
performance☆
Arafat Salih Aydinera, Ekrem Tatoglub, , Erkan Bayraktarc, Selim Zaimd
⁎

a
Faculty of Political Sciences, Istanbul Medeniyet University, Kadikoy, Istanbul, 34000, Turkey
b
School of Business, Ibn Haldun University, Basaksehir, Istanbul, 34494, Turkey
c
College of Engineering and Technology, American University of the Middle East, Kuwait
d
College of Engineering and Natural Sciences, Istanbul Sehir University, Kartal, Istanbul, 34865, Turkey

ARTICLE INFO ABSTRACT

Keywords: This study contributes to the extant literature on information management by investigating the interrelation-
Information system capabilities ships between information systems (IS)-related capabilities and their effects on firm performance. Using the
Resource-based view resource-based view (RBV), a set of hypotheses is formulated to examine these links, considering the role that
Decision-making performance may be played by decision-making performance and business-process performance as mediating variables.
Business-process performance
Structural equation modeling (SEM) has been applied to a sample of 204 firms in Turkey. The test results
Firm performance
Emerging countries
obtained confirm the proposed serially mediating model according to which decision-making performance and
business-process performance play a critical mediating role in the human resource and administrative-related IS
capabilities, and firm-performance relationships. No support, however, has been found concerning the serial
mediation effect between infrastructure-related IS capabilities and firm performance.

1. Introduction growth in earnings (Bughin, Catlin, Hirt, & Willmott, 2018).

Considering the amount of money and effort invested in IS projects,
For the survival and growth of many firms in today’s businesses as well as the expectations raised for better firm performance, there is a
environment, creative use of information technology (IT)/information significant concern about whether or not the anticipated value is being
systems (IS) is essential. IT and IS together provide new opportunities to realized from IT/IS investments (Carr, 2003; Henderson &
businesses to redesign their business processes and work practices, Venkatraman, 1993). Therefore, a substantial number of studies has
while enabling organizational change (Dedrick, Gurbaxani, & Kraemer, been conducted to investigate the impact of IT/IS on firm performance.
2003). However, a recent survey by McKinsey & Company reveals that To exemplify, Table 1 provides a summary of selected past studies
nearly half of the IT/IS projects exceed their budgets (Bloch, Blumberg, reporting both direct and indirect associations on the relationship
& Laartz, 2012). Large IT/IS projects overrun their budgets by 45 between IT/IS capabilities and firm performance using various
percent, exceed their allotted time by 7 percent and provide 56 percent theoretical perspectives. Some of these studies have captured a direct
less value than predicted. Moreover, 17 percent of IT/IS projects are positive relationship between IT capabilities and firm performance
managed so poorly that they may jeopardize the existence of the (Bharadwaj, 2000; Devece, Palacios, & Martinez-Simarro, 2017;
company (Bloch et al., 2012). In the absence of proper governance of Devece, Palacios-Marqués, Galindo-Martín, & Llopis-Albert, 2017;
business processes, IS/IT-enabled process-management practices may Santhanam & Hartono, 2003). Various authors, such as Chae, Koh, and
also fail (Rahimi, Møller, & Hvam, 2016). Furthermore, according to Prybutok, (2014), have pointed out that IT capabilities have no positive
McKinsey’s research on digital revenue growth, only a small number of direct impact on firm performance anymore, since more standardized
firms are doing better in the digital era, while three quarters of them and homogeneous IS are being implemented through enterprise
encounter the negative effects of digital competition on a company’s resource planning (ERP) and web technologies since the 2000s. Many

We are indebted to the invaluable comments and feedback of Editor Professor Yogesh Dwivedi and two anonymous reviewers.
☆

Corresponding author.
⁎

E-mail addresses: arafat.aydiner@medeniyet.edu.tr (A.S. Aydiner), ekrem.tatoglu@ihu.edu.tr (E. Tatoglu), Erkan.Bayraktar@aum.edu.kw (E. Bayraktar),
selimzaim@sehir.edu.tr (S. Zaim).

https://doi.org/10.1016/j.ijinfomgt.2018.12.015
Received 9 July 2018; Received in revised form 4 December 2018; Accepted 24 December 2018
0268-4012/ © 2018 Elsevier Ltd. All rights reserved.
A.S. Aydiner et al. International Journal of Information Management 47 (2019) 168–182

Table 1
Summary of studies between IT/IS capabilities and firm performance.
Related studies on IT/IS Theoretical perspective used Types of IT/IS capabilities and performance measures Nature of relationship between
capabilities-firm performance IT/IS capabilities and firm
performance

Bharadwaj (2000) Resource-based view IT capability and firm performance Direct relationship
Tippins and Sohi (2003) Resource-based view IT competency, organizational learning and firm performance Indirect relationship
Santhanam and Hartono (2003) Resource-based view IT capability and firm performance Direct relationship
Ravichandran and Lertwongsatien Resource-based view IS resources and capabilities, IT support and firm performance Indirect relationship
(2005)
Stoel and Muhanna (2009) Resource-based view Internal IT capability, external IT capability and firm performance Direct relationship
Mithas et al. (2011) Resource-based view IT-enabled information management capability, organizational Indirect relationship
capabilities (customer management capability, process
management capability, performance management capability) and
firm performance
Chen (2012) Resource-based view IT/IS resources (technological, human and complementary Indirect relationship
organizational resource), organizational capabilities and financial
performance
Kim et al. (2009) Resource-based view IS management capability, IS infrastructure capability, IS personnel Direct relationship
capability and firm performance
Pérez-López and Alegre (2012) Dynamic capabilities IT-competency, knowledge management process, market Indirect relationship
performance and firm performance
Gu and Jung (2013) Resource-based view and the IS resources, complementary organizational resources, IS Direct relationship
information systems success model capabilities, business process performance and organizational
performance
Chen et al. (2015) Corporate entrepreneurship IT capability, corporate entrepreneurship, competitive intensity, Indirect relationship
perspective innovation performance
Wang et al. (2015) Resource-based view and systems IT assets, IT management, environmental dynamism and firm Indirect relationship
theory performance
Peng et al. (2016) Process-based view IT, process management capability, supply chain management Indirect relationship
capability and firm performance
Chae et al. (2018) Industry-based view IT capability, industry categories and firm performance Indirect relationship

other studies also highlight the indirect effect of IT/IS capabilities on & Kou, 2015). However, IS are not concerned with IT only, but also deal
firm performance that should be investigated further (Dedrick et al., with business systems, processes and people to manage the information
2003; Gu & Jung, 2013; Huber, 1990; Ravichandran & Lertwongsatien, effectively (Checkland & Holwell, 1998). According to Devaraj and
2005). Among these studies, Stoel and Muhanna (2009) investigate the Kohli (2003), the actual usage of such systems is important, and it is the
role of environmental conditions in the relationship between IT cap- missing link between IT/IS and firm performance. Two of the most
ability and firm performance, while Pérez-López and Alegre (2012) and critical areas indicating the effective usage of IS and its impact on firm
Garrison, Wakefield, and Kim (2015) consider knowledge management performance are the decision-making processes and business processes.
and cloud success, respectively. Many intermediary links, such as Therefore, to explore the strategic role of IS capabilities, this study
customer value (Ainin, Mohd, Salleh, Bahri, & Mohd Faziharudean, investigates the relationship between IS capabilities and firm perfor-
2015; Gu & Jung, 2013), quality of implementation processes (Yeh, Lee, mance through the mediation of business-process performance and
& Pai, 2012), and business-process performances (Gu & Jung, 2013; decision-making performance. IS capabilities under consideration in-
Mithas, Ramasubbu, & Sambamurthy, 2011), were noted to clude infrastructure (Mithas et al., 2011; Pérez-López & Alegre, 2012;
significantly influence the relationship between IS capabilities and firm Ravichandran & Lertwongsatien, 2005), human resources (Tippins &
performance. While testing the moderating effect of IT implementation Sohi, 2003; Bharadwaj, 2000; Cepeda-Carrion, Cegarra-Navarro, &
levels, Céspedes-Lorente, Magán-Díaz, and Martínez-Ros (2018) find Jimenez-Jimenez, 2012; Ravichandran & Lertwongsatien, 2005) and
that IT mitigates the negative impact of downsizing on firm perfor- administrative capabilities (Pérez-López & Alegre, 2012; Ravichandran
mance. As a moderator, strategic emphasis of IT plays a significant role & Lertwongsatien, 2005; Yeh et al., 2012). These IS capabilities, which
in the relationship between IT investments and firm performance, are value-added strategic combinations of resources and competencies,
though its effect varies significantly (Mithas & Rust, 2016). In their are the complex routines that dynamically define the effective
study to investigate the impact of IT capabilities on firm performance, transformation of the inputs into outputs in a firm (Ravichandran &
Chae, Koh, and Park, (2018) show that the strategic role of IT varies Lertwongsatien, 2005). Thus, IS capabilities create a broader view of a
from industry to industry and IT is really a differentiating factor in the firm by combining the resources and competencies in order to achieve
industries where IT fundamentally changes business and industry superior performance.
processes. Consequently, these studies show inconsistent findings about This study contributes to information management (IM) literature
the possible ways that IT/IS capabilities may impact on firm perfor- in a number of ways. First, specifying IS capabilities with resources
mance (Gable, Sede, ra, & Chan, 2008) and deviate in the selection of and competencies enables the use of the resource-based view (RBV) to
variables and the levels at which those variables are collected (Devaraj better explore the strategic value of IS. Second, a new serial multiple
& Kohli, 2003). mediator model is designed to consider the influence of decision-
Many of the previous studies focus on either IT investment or making performance and business-process performance on the
IT capability, which was described by both computer and tele- relationship between IS-related capabilities (i.e., infrastructure,
communications technologies and associated hardware, software, and human resources and administrative) and firm performance. It is
services (Bassellier, Reich, & Benbasat, 2001; Bharadwaj, envisaged that the adoption of this approach creates a distinct
Sambamurthy, & Zmud, 1999; Bharadwaj, 2000; Dedrick et al., 2003; epistemology for organizations to have a strategic IS perspective.
Tippins & Sohi, 2003; Santhanam & Hartono, 2003; Stoel & Muhanna, Third, there is a clear paucity of empirical research about IM within
2009; Pérez-López & Alegre, 2012; Chen, Wang, Nevo, Benitez-Amado, emerging country settings (Aydiner, Tatoglu, Bayraktar, Zaim, &

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Delen, 2019; Dedrick et al., 2003). Moreover, even a relatively smaller facets. The extant literature proposes various perspectives regarding IS
portion of the studies investigates firm-level competitiveness and capabilities. For instance, Feeny and Willcocks (1998) suggested three
emphasizes the strategic importance of IT/IS to achieve long-term perspectives: the design of the IT architecture, the business and IT
gains (Avgerou, 2008). Thus, this study contributes to the IM research vision, and the provision of IS services. Amidst these perspectives, IS
in emerging countries through examining the case of Turkey, which is capabilities have been identified as relationship building, business
undoubtedly a key emerging country that exhibits comparable fea- system thinking, leadership, architecture planning, contract facilitation,
tures with other sizable emerging countries, such as Brazil, Mexico, contract monitoring, informed buying, and vendor development
Russia, and Poland (Gölgeci, Gligor, Tatoglu, & Arda, 2019). (Feeny & Willcocks, 1998). In addition, the pertinent IS capabilities
The remainder of the study is organized as follows. In the next by Mclaren, Head, Yufe, and Chan (2011) have been described as
section, we provide background literature and set out the study’s operational flexibility, operational efficiency, planning, and external
hypotheses. Then, the research methodology is presented in Section 3. and internal analysis. Furthermore, IS capabilities also comprise three
Section 4 provides the data analyses and results, followed by the interrelated attributes: business and IS knowledge, flexibility of IT
discussion of findings. The conclusion is set out in the final section. infrastructure, and the effective usage of the processes. IS capabilities
are associated with resources and competencies. Resources constitute
2. Theoretical background and hypotheses the stocks of available factors held or controlled by the organization
(Peppard & Ward, 2004:175), and tangible IS resources therefore
The RBV argues that firms possess resources to create a competitive denote the IT infrastructure that is possessed and controlled by an
advantage in order to attain a superior performance while examining organization. The competencies represent the organization’s cross-
the link between the internal characteristics of a firm and its perfor- functional capacity to organize, exploit, and activate these resources.
mance (Barney, 1991; Wernerfelt, 1984). The IT/IS resources of a firm According to Peppard and Ward (2004), IS competencies include six
are composed of tangible assets such as hardware and software namely distinct features: Formulating a strategy, defining the IT capability,
IS infrastructure, human assets such as IT/IS employees, their skills and defining the IS contribution, delivering solutions, exploitation, and
commitment to their jobs, and intangible assets such as corporate supplying. Both resources and competencies describe the capabilities
culture, IT/IS administrative skills, competencies, and experience composed of these domains (Garrison et al., 2015). Hence, IS
(Wheelen, Hunger, Hoffman, & Bamford, 2017). In line with the capabilities are built upon the IS resources and IS competencies and
classification of Barney (1991), IS infrastructure, IS human resources, become the basis of a competitive paradigm that provides knowledge to
and IS administration are defined as main IS resources, referring to organizations to generate superior performance (Peppard & Ward,
physical, human, and organizational capital resources, respectively. If a 2004; Wang et al., 2015).
firm has an ability to exploit these resources (Wheelen et al., 2017), and For sustained competitive advantage, this study adopts RBV to
carries them out to a level of capacity to achieve its tasks and activities explain a superior performance for a firm using IS resources classified as
(Ravichandran & Lertwongsatien, 2005), a capability can be built up on physical, human, and organizational capital (Barney, 1991). Accord-
a certain function. Capabilities are repeatable patterns of actions for the ingly, based on the extant literature, three distinct but interrelated
utilization of assets to create, produce, and/or offer products to the capabilities, rather than being hierarchically linked with each other, are
necessary environment. Thus, these capabilities involve infrastructure, explained in the ensuing subsections: IS infrastructure capability, IS
human capital, processes, managerial abilities and skills (Wade & human resource capability, and IS administrative capability.
Hulland, 2004). In this study, drawing on the RBV, IS capabilities
are composed of infrastructure, human, and administrative capabilities, 2.1.1. IS infrastructure capability
so that they develop an ability to exploit IS resources to create a Infrastructure mainly refers to IT. Therefore, IT and IS are the
competitive advantage. These heterogeneously distributed, immobile terms that are used together within the subject of technology. As one of
resources and capabilities are considered as the sources of the perfor- the key firm-specific resources, IT infrastructure is a group of
mance differences among the competing firms according to RBV shared technologies necessary for the foundation of all the business
(Barney, 2001). There is a vast literature that adopts RBV to explain the applications. It is considered as an indispensable part of a firm’s
source of competitive advantage in IM field. Initial discussions about structure. It establishes the technical platform and the service resources
the adaptation of RBV to IS mainly focused on IT and IT investments needed to respond swiftly to a firm’s needs and changes. In addition,
(Bharadwaj, 2000; Santhanam & Hartono, 2003; Tippins & Sohi, 2003; the IT infrastructure includes the resources, artifacts, and tools that
Melville, Kraemer, & Gurbaxani, 2004; Wade & Hulland, 2004). There contribute to the acquisition, processing, storage, distribution, and use
is also a growing literature using RBV to explain the impact of different of information (Pérez-López & Alegre, 2012). Thus, these technical
IT/IS capabilities on firm performance (Duhan, 2007; Gu & Jung, 2013; capabilities build up a capacity to affect the firm’s performance by
Luo, Fan, & Zhang, 2012; Ordanini & Rubera, 2010; Ravichandran & speeding up the necessary business initiatives.
Lertwongsatien, 2005; Stoel & Muhanna, 2009; Wang, Shi, Nevo, Li, & The IT infrastructure provides easy and fast access to the necessary
Chen, 2015). information and enables knowledge transfer. A strong infrastructure
enhances the influence of IS capabilities over firm performance by
2.1. IS capabilities standardizing and automating certain tasks and enabling transfer of
tacit knowledge into explicit knowledge (Pérez-López & Alegre, 2012).
IS capabilities are key indicators of a firm’s capacity to implement A flexible IT infrastructure also positively supports IS capabilities
and utilize IT systems effectively. IS capabilities involve the by providing a platform ready to access the appropriate data and
implementation of strategically aligned planning for swift delivery and establishing a network system to communicate with other systems. All
cost-effective operations and support (Gu & Jung, 2013). Similarly, IS of the firm’s units adapt and integrate the IT infrastructure to change
capabilities may be described as a means of classifying and providing the business’s direction and needs. Therefore, the infrastructure
access to knowledge that is learned and successfully applied. Cepeda- becomes part of the IS capabilities to reach every point and cover the
Carrion et al. (2012) argue that IS capabilities positively increase the range of the firm’s boundaries (Mithas et al., 2011).
knowledge capacity of organizations. Thus, rigorous IS capabilities are Most of the time, it is easy for rival firms to imitate each other’s
likely to produce value in an organization by quickly responding to IT infrastructure, where these physical resources are available to
changes in the business environment (Peppard & Ward, 2004; Wang procure without any difficulty. When basic IT is transformed into
et al., 2015). IS infrastructure capability (IS-IC), which is the distinct capacity to
IS capabilities are composed of complicated and multidimensional support the IS capabilities, it then becomes a rent-yielding and

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inimitable resource. This is in line with VRIO framework analysis drawn that there is consistency in the IS policies throughout an organization
from the logic of RBV, which clearly posits that firm performance and decreases the duplication and redundancy in a system and orga-
depends on the extent to which a firm simultaneously possesses nization (Bharadwaj et al., 1999). This capability creates an enterprise
valuable (V), rare (R), imperfectly imitable (I) resources or capabilities architecture perspective, which acts as a planning and piloting instru-
that are properly organized (O) (Barney, 1991; Rothaermel, 2015). ment that translates strategies into programs and projects (Land,
Thus, IS-IC is considered as one of the key resources or capabilities for a Proper, Waage, Cloo, & Steghuis, 2009).
firm to gain sustainable competitive advantage.
2.2. IS capabilities and decision-making performance
2.1.2. IS human resource capability
Technical operations require a technical skill set to achieve certain IS capabilities have a central role in decision-making. Managers and
activities at certain performance levels (Tippins & Sohi, 2003). executives face highly unstructured tasks and need to make decisions
IS human resource capability (IS-HRC) is designed to disseminate despite a high degree of uncertainty (Islei, Lockett, Cox, Gisbourne, &
technical capacity and make sure that this capacity works efficiently Stratford, 1991). Nevertheless, some scholars claim that IS capabilities
and effectively (Cepeda-Carrion et al., 2012). Thus, IS-HRC makes an do not have an important impact on decision-making. To exemplify,
important contribution to the development of IS capabilities. There are Wildavsky (1983) argues that computer systems are only a way of
two distinct characteristics of IS-HRC (Ravichandran & Lertwongsatien, collecting, retrieving, and storing data that concentrates on IS-IC. Thus,
2005): Skills and specificity. Whereas skills refer to the possession of IS formal information systems provide structured data, but decision ma-
personnel with the required technical and business skills, specificity kers also need to have intangible, unstructured information to make
defines the level of understanding of IS personnel the culture and the decisions (Molloy, 1990). However, other scholars have supported the
routine of the firm. The technical skills of IS-HRC also include pro- positive impact of IS capabilities. For instance, Huber (1984) stated that
gramming, system analysis and design, and competencies in emerging technology reduces the amount of time that is spent on reviewing
technologies (Bharadwaj, 2000). These characteristics of IS-HRC enable information. Without having adequate IS capabilities, firms fall behind
IS staff to communicate quickly and easily and integrate their knowl- in their competitiveness compared with their rivals by not making
edge with that of the business staff by providing rapid troubleshooting the necessary decisions in a timely manner. Using technological
when problems occur. Human capabilities also stem from an under- infrastructure and related systems, the time and effort required to make
standing of the fundamentals of IT. Thus, IS staff can work within a decisions may be reduced. Thus, IS capabilities increase the effective-
wide range of system environments based on their knowledge of ness of managers in decision making to achieve their organizational
different programming capacities (Feeny & Willcocks, 1998). Strong goals (Huber, 1990). In addition, a large variety of people can partici-
IS-HRC has the capability to integrate IS and business processes more pate in the decision-making processes. IS capabilities also reduce the
effectively; develop more reliable and cost-effective applications; level of hierarchy in an organization during decision-making processes
integrate and communicate with the business departments/units more and lead to faster and more accurate identification of problems and/or
efficiently; and perform proactively to create future business and opportunities. Accurate forecasting critically improves the transparency
innovative new technological infrastructures to develop the value of the and ability to make decisions; therefore, managers can concentrate on
business (Bharadwaj, 2000). more critical factors (Islei et al., 1991).
The ability of firms to provide empowerment and autonomy to The extant literature posits that a firm’s IS capabilities, including IS-
teams, improve and share tasks, provide a collaborative work IC, IS-HRC, and IS-AC, are composed of an alignment between business
environment, and organize and integrate their work practices creates and decision-making processes. Business is a goal-seeking activity that
opportunities in which IS personnel can not only leverage their tech- resolves problems through decision-making. Thus, it is evident that the
nical skills but also deliver the assets of the socio-technical networks alignment of business with decision making through IS capabilities,
effectively to the firms (Bharadwaj, 2000). namely IS-IC, IS-HRC, and IS-AC, has a positive effect on decision-
making performance. This discussion leads to the following multi-part
2.1.3. IS administrative capability hypotheses.
The IS administrative capability (IS-AC) is the main driver of the
H1a. IS infrastructure capability (IS-IC) is positively associated with
identification and development of the IS capabilities that are the most
decision-making performance.
directly associated with a firm’s needs and values (Feeny & Willcocks,
1998; Wang et al., 2015). The idea of administration within IS in- H1b. IS human resource capability (IS-HRC) is positively associated
troduces the factors that explain the quality of IS practices and with decision-making performance.
the ability to develop the proper processes needed to sense, gather,
H1c. IS administrative capability (IS-AC) is positively associated with
organize and disseminate information and to instill the anticipated
decision-making performance.
information behaviors and values in workers (Mithas et al., 2011). The
administrative approach is mainly related to IM, performance
monitoring, human resource management, planning, asset management 2.3. Decision-making performance and business-process performance
and resource allocation (Zwass, 1997). To accomplish these adminis-
trative duties, leadership is necessary for the performance of these Decision-making performance affects managerial choices when
activities. The IS-AC sets the goals and the direction for each of the IS identifying the viable courses of action for a firm (James & Mark,
resources and competencies. The way in which work is carried out in 1996), whereas business processes describe the way in which a firm
the IS is determined by the IS-AC. The policies and rules of engagement, manages its products and services. Therefore, good decision-making
the strategic perspective and security are parts of the IS-AC (Feeny & performance directs business processes toward the adoption of
Willcocks, 1998). IS planning is the main stream of management successful new products and services, and helps to integrate them with
activity that ensures that the IS goals and initiatives are aligned new technologies (Baum & Wally, 2003), which lead to better business-
with the business strategies and plans. This convergence enables IS process performance. Business-process performance measures the
capabilities to be implemented strategically and the value of a business financial and non-financial flexibility, reliability, responsiveness and
to be improved (Ravichandran & Lertwongsatien, 2005). The adminis- costs/assets of organizational and operational capabilities (Bernhard,
trative capability should be able to organize the best emerging tech- Peter, Zoltan, & Maria-Luise, 2006). Likewise, business processes
nologies, assess the need for technologies and coordinate with external examine operational performance to make improvements. It improves
entities when necessary (Chen & Wu, 2011). An effective IS-AC ensures business models so that firms can better compete against their rivals.

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Effective decision-making performance enables economies of scale and in the literature conclude that IS capabilities are both directly and in-
knowledge synergies in different organizational combinations, and directly related to business-process performance attributes (Luo et al.,
facilitates the exploitation of opportunities in both dynamic and non- 2012). Nevertheless, decision-making performance depicts a capacity to
dynamic environments. For instance, the prediction of market behavior decide on a feasible course of action in a firm (James & Mark, 1996).
may ignite organizational learning of business processes and may Thus, in this study, we adhere to the indirect notion and argue that
change performance behaviors (Baum & Wally, 2003). Since business decision-making performance creates an indirect link between IS-IC,
processes involve multidisciplinary and complex situations, they draw IS-HRC, and IS-AC, and business-process performance. This is stated
knowledge from different resources, such as information systems and more formally in the following set of hypotheses:
their capabilities, decision-making performance and operations man-
H3a. Decision-making performance mediates the relationship between
agement (Bisogno, Calabrese, Gastaldi, & Ghiron, 2016). Thus, we
IS-IC and business-process performance.
expect a positive relationship between decision-making performance
and business-process performance, which leads to the following H3b. Decision-making performance mediates the relationship between
hypothesis: IS-HRC and business-process performance.
H2. Decision-making performance is positively associated with H3c. Decision-making performance mediates the relationship between
business-process performance. IS-AC and business-process performance.
Through IS capabilities, providing accurate and more reliable data,
2.4. Mediating effect of decision-making performance forecasting ability and decision models will increase the effectiveness of
the decision makers to make faster comprehensive decisions effectively,
The impact of IS capabilities on business-process performance has then achieve the objective of the organization (Huber, 1990). There-
been studied a lot in the literature. Many IS studies have indicated that fore, the integration of IS capabilities into decision-making processes
successful IT infrastructure investments generate substantial changes helps organizations to improve their performance (Baum & Wally,
within business processes leading to superior performance. These sub- 2003). IS-IC, IS-HRC, and IS-AC provide the necessary infrastructure,
stantial changes occur in terms of direct and indirect effects between IS know-hows, skill sets, and organizational abilities to make compre-
capabilities (IS-IC, IS-HRC, and IS-AC) and business-process perfor- hensive decisions. Therefore, better decision-making performance
mance. Earlier research by Elbashir, Collier, and Davern (2008) reveals enhances the relationship between each of the underlying dimensions
that IS help firms to create business value since they have a direct of IS capabilities and firm performance, and thus leads to the following
impact on business processes. The impact of IS capabilities may be multi-part hypotheses:
visible in the improvement of the efficiency and effectiveness measures
H4a. Decision-making performance mediates the relationship between
of business processes (Peng, Quan, Zhang, & Dubinsky, 2016; Rahimi
IS-IC and firm performance.
et al., 2016). Gu and Jung (2013) identify six areas of the value chain
that IS capabilities support and improve a firm’s core business activities: H4b. Decision-making performance mediates the relationship between
Production and operations, supplier relations, process planning and IS-HRC and firm performance.
support, sales and marketing support, product and service enhance-
H4c. Decision-making performance mediates the relationship between
ment, and customer relations. Operational efficiency, order fulfillment
IS-AC and firm performance.
rates, satisfied consumer expectations, and customer intimacy are es-
sential indicators of the business-process performance. Despite these
claims about the direct effect of IS capabilities on business-process 2.5. Serial mediating effect of decision-making performance and business-
performance, these effects may not be possible to realize without a process performance
strong and effective decision-making process. Some of the previous
literature state that IS capabilities support superior business-process IS capabilities, in terms of IS-IC, IS-HRC, and IS-AC, can influence
performance indirectly by applying and leveraging the other resources business value, and they build the relationship between departments
and capabilities of a firm (Aringhieri, Carello, & Morale, 2016; Luo and functions in today’s business world. When they create a link with
et al., 2012; Rahimi et al., 2016; Ravichandran & Lertwongsatien, other firm resources, IS capabilities as a whole provide strategic
2005). Superior business-process performance includes not only in- benefits (Wade & Hulland, 2004). According to Powell and
dividual but also operational efficiency, customer service efficiency and Dent-Micallef (1997), IS capabilities eventually lead to higher firm
product/service development. Operational efficiency aims at devel- performance, but they may not contribute directly to the sustaining
oping and delivering efficient and effective products/services across all firm performance. IS capabilities should interact with other firm
channels. At this point, IS-IC, IS-HRC, and IS-AC together create op- resources to achieve a sustainable firm performance.
portunities to reach these channels by using different methodologies, Based on the preceding discussion and confirming evidence
such as websites, enterprise software, or communication utilities, reported earlier, the relationship between the facets of IS capabilities
providing and/or developing necessary skill sets, and setting visionary (IS-IC, IS-HRC, and IS-AC) and firm performance may be indirectly
sights. Customer intimacy posits the creation of customer value, which linked. However, most of the studies have focused on only a single
integrates the possession of distinctive market knowledge and sense, mediation effect at a time or a parallel one (Hu, Chang, & Hsu, 2017;
and customer relationship within the internal processes of a firm. For Peng et al., 2016). We posit that there should be more than one
the creation of customer value, business intelligence and customer re- mediation impact on firm performance to ensure sustained and im-
lationship management systems are the main resources. Firms with proved firm performance, and that these multiple mediators may have
these IS capabilities are more conscious of emerging market opportu- association with each other as well (Hayes, 2013). Thus, the serial
nities and are able to offer new products/services according to their multiple mediator model of decision-making performance and business-
customers’ needs. Meanwhile, identification of new markets and entry process performance may lead IS-IC, IS-HRC, and IS-AC to have a
into them are decision-making activities, and such decisions may affect positive effect on firm performance. This is stated more formally in the
the business processes and their performance (Ravichandran & following multi-part hypotheses.
Lertwongsatien, 2005). By improving the existing business processes,
H5a. Decision-making performance and business-process performance
practical research results report that IS capabilities help to assess the
serially mediate the relationship between IS-IC and firm performance.
current business-process performance and improve the decision-making
performance (Aringhieri et al., 2016). These two different perspectives H5b. Decision-making performance and business-process performance

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Fig. 1. Conceptual framework.

serially mediate the relationship between IS-HRC and firm fewer than 50 employees were excluded from this sample frame, as the
performance. small-size firms largely lack the required resources to invest in IS
systems and applications.
H5c. Decision-making performance and business-process performance
The targeted respondents who would fulfill the surveys were asked
serially mediate the relationship between IS-AC and firm performance.
to be senior and executive managers or medium-level managers with
Fig. 1 shows the conceptual framework that depicts the nexus of the relevant knowledge of IS capabilities as well as knowledge of the entire
relationships between the main constructs discussed above. company. A cover letter of the survey clearly indicated the required
profile for an acceptable respondent. The respondents who did not meet
3. Research methodology these criteria were eliminated during the data evaluation process.
The sampling frame was constructed from the members of the TOBB
3.1. Survey setting and data collection (Union of Chambers and Commodity Exchanges of Turkey). The TOBB
database consists of 365 local chambers of commerce, maritime com-
The data for this study was collected through a mail survey using a merce, and commodity exchange with over one million firms. Following
questionnaire. The design, the development of the measurement items, the elimination of firms that did not meet the selection criteria, we
and the questionnaire were constructed in line with the guidelines that randomly sampled 800 firms from this database. Following two waves
have commonly been mentioned in prior research (Dillman, 2007; of data collection and one reminder, a total of 236 questionnaires were
Hinkin, 1998). Based on a comprehensive review of the relevant lit- returned; of which 204 were usable, representing an effective response
erature, the survey instrument was prepared to measure the following rate of 25.5 percent. The remaining 32 questionnaires were eliminated
three dimensions of IS capabilities: Infrastructure capability, human due to missing values, improper respondents/firms and double
resource capability, and administrative capability. Again, relying on the respondents. A summary of the characteristics of the sample is shown in
existing literature, the following constructs were developed: Decision- Table 2.
making performance, business-process performance, and firm perfor- Non-response bias was tested using Armstrong and Overton (1977)
mance. method. The early respondents to the surveys were compared with the
To establish the content validity of the measures used in this study, late respondents. We first compared the responses from early and late
the procedure suggested by Hair, Money, Samouel, and Page (2007) respondents to the survey and found no statistically significant differ-
was employed. First, in-depth interviews were conducted with three ences (p > 0.05). Second, a comparison of a randomly selected group
chief technology officers (CTOs) in Turkey, who provided us their views of 100 non-respondent firms with 204 respondent firms revealed
of the issues on IS applications and capabilities based on their actual no significant differences for any organizational level indicators
knowledge and experience. Second, an initial version of the survey (e.g., number of employees, years of operation, and annual sales). In
questionnaire was revised based on discussions with several expert addition, a relatively high response rate (25.5 percent) meant that the
academics. Finally, a pre-test was conducted with six business profes- respondent firms were likely to provide a reasonable representation of
sionals that provided eventual fine-tuning opportunities to develop an the total sample, which is another solution to non-response bias (Rose,
informative, clear, and well-structured survey questionnaire. Sidle, Griffith, Rose, & Griffith, 2007). Therefore, no evidence was
We sampled a range of firms from several product-intensive found for non-response bias. An additional check was undertaken to
industries located in Turkey to achieve a high level of external validity verify whether there was any significant variation in the responses
and generalizability of the survey findings. The respondent firms were stemming from the nature of the respondent manager’s functional area
selected among medium-size and large-size firms. Thus, small firms of of responsibility (i.e., IT/IS-related vs. non-IT/IS-related) that are likely

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Table 2 IS-IC was adapted from earlier studies (Gable et al., 2008; Mithas
Characteristics of the sample. et al., 2011; Pérez-López & Alegre, 2012; Ravichandran &
Characteristics Number % Lertwongsatien, 2005). The items comprising IS-IC included: “devel-
oping customized applications,” “reliability of solutions and products,”
Respondent’s position Senior/executive manager 106 52 “readiness of IS infrastructure,” “response pace for requests,” “network
Middle/first line manager 98 48 infrastructure competency,” “infrastructure security,” “data sharing,”
Respondent’s functional IT/IS related 73 35.8
area of responsibility Non-IT/IS related 131 64.2
and “fast and flexible Internet-based operations.”
Firm size (number of Medium-size (less than 250) 87 42 The items constituting the IS-HRC were drawn from earlier studies
employees) Large-size (equal or more than 117 58 (Bharadwaj, 2000; Cepeda-Carrion et al., 2012; Pérez-López & Alegre,
250) 2012; Ravichandran & Lertwongsatien, 2005; Tippins & Sohi, 2003)
Firm age (years of Young firms (equal or less 61 30
and are as follows: “knowledge of IS,” “expertise in IS,’ “ability to learn
operation) than 15)
Middle age firms (16-30) 80 39 and apply new technologies,” “skills and knowledge capacity,”
Mature firms (more than 30) 63 31 “capability of implementing,” “capability of discovering problems,” and
Annual revenue (Turkish Less than 25 million 34 17 “capability of maintaining.”
Lira) 25 million-99 million 44 22 The items measuring the IS-AC were adapted from the extant lit-
100 million-249 million 26 13
250 million-499 million 19 9.3
erature (Pérez-López & Alegre, 2012; Ravichandran & Lertwongsatien,
Equal or more than 500 81 40 2005; Yeh et al., 2012). The items comprising the IS-AC include: “IS
million strategy,” “IS management authority,” “IS planning capacity,” “IS
Industry sectors Food and beverages 16 7.8 adaptation to the development process,” “guideline for service
Durables, consumer 22 11
requests,” and “IS service quality.”
electronics and machinery
Chemicals, pharmaceutical 15 7.4 Decision-making performance (DMP) evaluates the efficiency and ef-
and plastics fectiveness of the decision-making in a company. The scale for this
Textile, leather and clothing 26 13 construct was drawn from the previous literature (Gable et al., 2008;
Other manufacturing 8 3.9 Huber, 1990; Mclaren et al., 2011; Mithas et al., 2011; Tippins & Sohi,
Investment, banking and 22 11
finance
2003). The DMP includes the following items: “organizational
Transportation, 15 7.4 communication for effective decision making,” “culture of long-term
telecommunication and media planning,” “effective decision making,” “speed in analyzing informa-
Information systems and 23 11 tion,” “time management for decision making,” “reaching accurate and
technology services
comprehensive information,” “rapid and accurate identification of
Construction and real estate 11 5.4
Health and social services 12 5.9 problems and opportunities,” and “delegation of decision making.”
Wholesale and retail 22 11 It is not easy to select a single measure of business-process perfor-
Other services 12 5.9 mance (BPER). The extant literature has listed several quantitative and
qualitative objectives that have been set to guide BPER (Bayraktar,
Demirbag, Koh, Tatoglu, & Zaim, 2009; Elbashir et al., 2008; Luo et al.,
2012; Mahmood & Soon, 1991; Mclaren et al., 2011; Mithas et al.,
to bias the survey findings. The test results revealed no significant 2011). Based on this literature, a subjective approach for the mea-
differences in the responses between IT/IS-related and non-IT/IS- surement of the BPER construct was used, and the following items are
related managers (p < 0.05) for the following measures used in the included: “customer relationship,” “supplier relationship,” “internal
study: IS infrastructure capability (t-value = 1.35, p = 0.17), IS human and external coordination,” “purchasing cost,” “delivery time,”
resource capability (t-value = 1.85, p = 0.07), IS administrative “inventory level,” “economies of scale,” “utilization of tools and
capability (t-value = 1.90, p = 0.06), decision-making performance equipment,” “productivity of labor,” “customer request,” “accessing
(t-value = 0.27, p = 0.78), business-process performance (t-value = distribution channels and new markets,” “identifying market trends,”
0.35, p = 0.72) and firm performance (t-value = 0.38, p = 0.70). and “differentiated products and services.”
Prior studies have adopted either an objective or a subjective
3.2. Measurement of the variables approach to measuring firm performance (FP). The subjective approach
based on executives’ perceptions of performance has been widely used
The following are brief descriptions of the main constructs and in empirical studies, having been justified by several researchers (e.g.,
control variables used in the study. The main constructs are measured Dess & Robinson, 1984; Venkatraman & Ramanujam, 1986; Geringer &
through five-point Likert type scales ranging from 1 = “strongly dis- Hebert, 1991; Collings, Demirbag, Mellahi, & Tatoglu, 2010). It should
agree” to 5 = “strongly agree.” While it has been claimed that the ideal also be noted that the use of objective or quantitative performance
number of item alternatives appeared to be centered on seven with measures might be subject to some limitations. To exemplify, Fisher and
some situations calling for as few as five or as many as nine (Cox, 1980), McGowan (1983) claim that objective measures in company statements
the literature suggests that a five-point scale appears to be less con- are flawed and are not appropriate for research purposes, while Day
fusing and to increase response rate and response quality along with and Wensley (1988) suggest an absence of suitable objective measures.
reducing respondents’ “frustration level” (Babakus & Mangold, 1992; Moreover, Turkish firms are not willing to disclose financial data unless
Devlin, Dong, & Brown, 1993). It should also be noted that five-point they are listed on the stock exchange, hence making access to quanti-
scale has been widely used in IM literature (e.g., Kim, Oh, Shin, & Chae, tative and objective measures of FP highly difficult. Due to such com-
2009; Dwivedi, Kapoor, Williams, & Williams, 2013; Kapoor, Dwivedi, plexities involved, the use of perceptual measures of FP was adopted
Piercy, Lal, & Weerakkody, 2014; Shareef, Kumar, Dwivedi, & Kumar, and the FP adapted here was derived from previous studies (Bharadwaj,
2016). 2000; Glaister, Dincer, Tatoglu, Demirbag, & Zaim, 2008; Mahmood &
Soon, 1991; Mithas et al., 2011; Ordanini & Rubera, 2010; Pérez-López
3.2.1. Main constructs & Alegre, 2012; Santhanam & Hartono, 2003; Stoel & Muhanna, 2009).
IS capabilities were measured with three constructs in the model. In This performance dimension includes the following criteria: “return on
line with the current IS literature, these were identified as IS infra- sales,” “distribution cost,” “market share,” “return on investment,”
structure capability (IS-IC), IS human resource capability (IS-HRC) and IS “administrative expense,” “inventory level,” “staff cost,” and “customer
administrative capability (IS-AC). loyalty.”

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3.2.2. Control variables 4.2. Reliability and validity of the constructs

The effects of firm-specific characteristics on FP were captured by
the following three control variables. A reliability and validity analysis were conducted to check the
Firm age (AGE) was measured by the number of years since the internal consistency of the constructs in Fig. 1. Unidimensionality of the
establishment of the firm. Young firms comprise those whose ages are constructs was measured with Cronbach’s alpha. As shown in Appendix
equal or less than 15 years. Middle-age firms include of those whose A, Cronbach’s alpha values varied between 0.77 and 0.88, which are
ages vary between 16 and 30. Mature firms are the ones whose ages greater than the threshold value of 0.70 (Hair, Black, Babin, &
are more than 30 years. Regarding the number of firms in these Anderson, 2010; Nunnally & Bernstein, 1994).
three age groups, the young firms group consists of 61 firms, while Composite reliability (CR) estimates the extent to which a set of
middle-age and mature groups include 80 and 63 firms, respectively. construct items share in their measurement of the construct (Hair et al.,
Firm size (SIZE) was measured by the number of employees. Firms 2010). The threshold value of 0.70 for CR specifies sufficient reliability
are broadly classified into two categories: Medium-size and large-size for a construct (Fornell & Larcker, 1981). As shown in Appendix A, the
firms. The firms with equal or more than 50 and less than 250 em- CR measurements are within the recommended thresholds, and each of
ployees are defined as medium-size, while those with 250 employees the constructs in the study is sufficiently reliable.
and more are labeled as large-size firms. This definition is consistent In addition, average variance extracted (AVE) estimates were also
with that of the Turkish Statistical Institute (TUIK, http://www. calculated to confirm the convergent validity. The threshold value of 0.5
turkstat.gov.tr/) and the Turkish Small Business Administration for AVE indicates adequate convergent validity for a construct (Fornell
(KOSGEB, https://www.kosgeb.gov.tr/). Regarding the number of firms & Larcker, 1981; Yusoff, 2011). As shown in Appendix A, the AVE
in these two groups, the medium-size group includes 87 firms, while measurements satisfy the recommended thresholds, so each of the
large-size group consists of 117 firms. constructs in the study is sufficiently reliable and has adequate
To control for the effect of industry sector (IND), two broad industry convergent validity.
categories were created: Manufacturing and service industries. In terms Discriminant validity describes the degree to which the measures of
of the number of firms in these two groups, the manufacturing group the different dimensions of all the constructs are different from each
includes 87 firms, while the service group includes 117 firms. other. In Table 3, the results of 15 pairwise tests are shown for
discriminant validity. The findings strongly confirm the discriminant
validity of each pair.
4. Data analysis and results The descriptive statistics and inter-correlations among the variables
are shown in Table 4. During data analysis, it was revealed that some of
Measurement model validation is performed through confirmatory the variables were not distributed normally. To warrant adequate
factor analysis (CFA). Cronbach’s alpha and composite reliability normality prior to data analysis, these variables were converted to a
values, convergent and discrete validities are also checked further for normal distribution using Templeton's two-step transformation
the reliability and validity of the model constructs. The potential for approach (Templeton, 2011).
common method variance (CMV) is investigated to validate the
constructed model. Finally, hypotheses of the proposed model are
examined. Details of these data analyses stages are discussed in more 4.3. Common method variance
detail in the ensuing subsections.
Potential for CMV was also investigated to check its influence on
structural results. The CMV may lead to erroneous conclusions about the
4.1. Measurement model validation relationships between the variables by inflating or deflating the variance
(Craighead, Ketchen, Dunn, & Hult, 2011). The Harman’s single-factor test
The measurement model considers the relationship between the was used to investigate the CMV in this study. In this single-factor test, all
constructs and their items. To test the measurement model validity in of the items in this study are subjected to an exploratory factor analysis
Fig. 1, confirmatory factor analysis (CFA) was applied to the data. The (EFA) (Malhotra, Kim, & Patil, 2006; Podsakoff & Organ, 1986). The
goodness-of-fit indices for the measurement model were found to be number of factors extracted from the EFA is forced to one. The results
satisfactory (χ2/df. = 1.38, the goodness-of-fit index [GFI] = 0.83, the reveal that the common method variance accounts for 30.41 percent of the
adjusted goodness-of-fit index [AGFI] = 0.80, the Tucker–Lewis coef- total variance. Thus, the CMV is not considered to be statistically
ficient [TLI] = 0.92 and the comparative fit index [CFI] = 0.93, significant, since it is below the threshold value of 0.50.
RMSEA = 0.043) and confirmed the proposed model. Furthermore,
factor loadings were also calculated to specify the degree of corre- Table 3
spondence between the variables. The factor loadings for each of the Discriminant validity of the measurement model.
constructs were found to be significant (p < 0.01). This validation also Test # Description χ2 model χ2 unconstrained model Difference*
approves the presence of IS-IC, IS-HRC, and IS-AC as the constructs to
represent a multidimensional measure of IS capabilities. Thus, they are 1 IS-IC→ IS-HRC 204.82 112.14 92.42
2 IS-IC → IS-AC 1070.73 1007.99 62.74
distinct in terms of their unique content but interrelated because of
3 IS-AC → IS-HRC 157.16 93.33 63.83
their total effect on IS capabilities. Relying on RBV, they are also critical 4 IS-IC→DMP 175.96 64.71 111.25
drivers for FP under the serial multiple mediators model. 5 IS-IC→BPER 242.32 88.30 154.02
In order to address the possible endogeneity bias, a two-stage least 6 IS-IC→FP 191.64 41.40 150.24
squares (2SLS) regression was adopted (Bellamy, Ghosh, & Hora, 2014; 7 IS-HRC→DMP 203.07 93.60 109.47
8 IS-HRC→BPER 256.93 118.62 138.31
Guide & Ketokivi, 2015). Endogenous variables were instrumented by 9 IS-HRC→FP 141.90 79.41 62.49
both AGE and SIZE as instrumental variables, since these two variables 10 IS-AC→DMP 139.66 61.51 78.15
were not significantly related to FP (Table 4). After performing the 2SLS 11 IS-AC→BPER 196.13 59.44 136.69
method using STATA, we conducted the Durbin–Wu–Hausman post- 12 IS-AC→FP 140.98 38.24 102.74
13 DMP →BPER 193.96 77.99 115.97
estimation test of endogeneity for the validity of the instruments
14 DMP →FP 186.15 70.41 115.74
(Davidson & MacKinnon, 1993; Liu, Wei, Ke, Wei, & Hua, 2016). The 15 BPER →FP 236.45 95.83 140.62
test results confirm the validity of instruments, indicating that the
results are unlikely to be influenced by endogeneity. * All values are significant at p < 0.001.

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Table 4
Descriptive statistics and inter-correlations.
Variables Definition Mean S.D. 1 2 3 4 5 6 7 8 9

1 IS-IC IS infrastructure capability 4.10 0.60 1

2 IS-HRC IS human resource capability 4.11 0.61 0.73** 1
3 IS-AC IS administrative capability 3.86 0.68 0.71** 0.73** 1
4 DMP Decision-making performance 3.76 0.68 0.44** 0.54** 0.54** 1
5 BPER Business-process performance 4.12 0.47 0.35** 0.44** 0.42** 0.68** 1
6 FP Firm performance 3.76 0.55 0.21** 0.27** 0.34** 0.46** 0.56** 1`
7 AGE Firm age 2.00 0.78 0.02 0.06 0.07 0.05 0.06 −0.01 1
8 SIZE Firm size 0.57 0.49 0.24** 0.18** 0.26** 0.06 0.05 0.09 0.24** 1
9 IND Industry sector 0.42 0.49 −0.11 −0.16 −0.17* −0.05 0.03 0.17* 0.14 0.00 1

* p < 0.05.
** p < 0.01.

4.4. Hypothesis testing 2008). These findings confirm that the model indicates a good fit to the
data.
The study examines the structural relationships between the Fig. 2 shows that H1a (γ1a) was not supported, indicating that IS-IC
constructs through a path analysis by considering the multiple has no association with DMP. However, strong support was found for
mediating effects. Path analyses with the AMOS software (Byrne, 2010) both H1b (γ1b) and H1c (γ1c) that IS-HRC and IS-AC have positive
were used to test the hypotheses in the conceptual model. The associations with DMP (γ1b = 0.38, γ1c = 0.56, p < 0.05).
maximum likelihood method was selected to calculate the model H2 (β1), which posits that DMP is positively associated with BPER,
parameters, and the results of the analyses are depicted in Fig. 2. In received strong support (β1 = 0.82, p < 0.01). With respect to the
addition to three constructs, comprising IS capabilities (i.e., IS-IC, mediating role of DMP between IS-IC and BPER, no support was found for
IS-HRC, and IS-AC), two mediating variables (i.e., DMP and BPER) and H3a (γ´3a = γ1a*β1) since DMP has no significant association with IS-IC.
three control variables (i.e., firm age, firm size and industry sector) are For testing mediation effect of DMP between the other two IS-related
also included in the model. The goodness-of-fit index of the model is capabilities (IS-HRC and IS-AC) and BPER, their total direct effects were
less than the threshold value of 3 (χ2/df = 1.38, p < 0.01). Moreover, analyzed in the absence of the mediating variable, DMP. These relation-
the fit indices for the model are also within the acceptable levels (GFI = ships for both capabilities were found significant. After re-introducing the
0.83, AGFI = 0.80, TLI = 0.92, CFI = 0.93, RMSEA = 0.043) (Cheung mediating variable, DMP, to the structural model, the direct relationship
& Rensvold, 2002; Hair et al., 2010; Hooper, Coughlan, & Mullen, between IS-HRC and BPER, as well as IS-AC and BPER, appeared to be

Fig. 2. Results of SEM with two serial multiple mediator effects+.

+
: Standardized regression weights are shown.
*
p < 0.05, **p < 0.01, NS: Not significant.

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Table 5a
Results of two serial multiple mediations for IS-HRC+.
Paths Relations Unstandardized weights Indirect effect z score Mediation

IS-HRC→BPER→FP IS-HRC→BPER 0.078 0.090 0.719 ξ

No support for mediation role of BPER
(0.108) (0.125)
BPER→FP 1.160
(0.135)
IS-HRC→DMP→FP IS-HRC→DMP 0.408 −0.076 −0.879ξ No support for mediation role of DMP
(0.190) (0.086)
DMP→FP −0.187
(0.194)
IS-HRC→DMP→BPER IS-HRC→DMP 0.408 0.198 2.016ξ* Support for full mediation role of DMP between IS-HRC and BPER
(0.190) (0.098)
DMP→BPER 0.487
(0.083)
DMP→BPER→FP DMP→BPER 0.487 0.564 4.845ξ*** Support for full mediation role of BPER between DMP and FP
(0.083) (0.116)
BPER→FP 1.160
(0.135)
IS-HRC→DMP→BPER→FP IS-HRC→DMP 0.408 0.230 1.963ξξ* Sobel test for serial mediation effect of DMP and BPER between IS-AC and FP
(0.190) (0.117)
DMP→BPER 0.487
(0.083)
BPER→FP 1.160
(0.135)

+
Standard errors are indicated within the parentheses.
*
p < 0.05, **p < 0.01, ***p < 0.001.
ξ
2-tail z score = 1* 1 / 12 *Se 12 + 12 *Se 12 for single mediation effect.
1* 1* 2
ξ ξ
2-tail z score= 2 2
for serial multiple mediation effect.
12 * 1 *Se 22 + 12 * 2 *Se 12 + 12 * 22 * Se 12

Table 5b
Results of two-serial multiple mediations for IS-AC+.
Paths Relations Unstandardized weights Indirect effect z score Mediation

IS-AC→ BPER→FP IS-AC→BPER 0.060 0.069 0.495 ξ

No support for mediation role of BPER
(0.121) (0.140)
BPER→FP 1.160
(0.135)
IS-AC→DMP→FP IS-AC→DMP 0.470 −0.087 −0.879ξ No support for mediation role of DMP
(0.218) (0.099)
DMP→FP −0.187
(0.194)
IS-AC→DMP→BPER IS-AC→DMP 0.470 0.228 2.023ξ* Support for full mediation role of DMP between IS-AC and BPER
(0.218) (0.113)
DMP→BPER 0.487
(0.083)
DMP→BPER→FP DMP→BPER 0.487 0.564 4.845ξ*** Support for full mediation role of BPER between DMP and FP
(0.083) (0.116)
BPER→FP 1.160
(0.135)
IS-AC→DMP→BPER→FP IS-AC→DMP 0.470 0.265 1.969ξξ* Sobel test for serial mediation effect of DMP and BPER between IS-AC and FP
(0.218) (0.134)
DMP→BPER 0.487
(0.083)
BPER→FP 1.160
(0.135)

+
Standard errors are indicated within the parentheses.
*
p < 0.05, **p < 0.01, ***p < 0.001.
ξ
2-tail z score = 1* 1 / 12 *Se 12 + 12 *Se 12 for single mediation effect.
2-tail z for serial multiple mediation effect.
ξ ξ 1* 1* 2
score= 2 2
12 * 1 *Se 22 + 12 * 2 *Se 12 + 12 * 22 * Se 12

insignificant, but an indirect relationship through DMP was found The first row of both Tables 5a and 5b shows that there is support for H3b
significant for both IS-HRC and IS-AC. This indirect effect between IS-HRC (γ´3b = γ1b*β1) and H3c (γ´3c = γ1c*β1), respectively (p < 0.05).
and BPER may be quantified as the product of unstandardized regression Therefore, DMP establishes a full positive mediation effect between both
weight of IS-HRC on DMP (γ1b) and DMP on BPER (β1), as shown in IS capabilities (i.e., IS-HRC and IS-AC) and BPER.
Table 5a (Hayes, 2013). Similarly, the indirect effect of IS-AC on BPER To check the mediation effect of DMP between IS-related capabilities
may be calculated by the product of γ1c and β1, as depicted in Table 5b. and FP as stated in H4a, H4b and H4c (γ´4a = γ1a*β3, γ´4b = γ1b*β3
Furthermore, the Sobel test was also applied to check whether the med- and γ´4c = γ1c*β3), a series of tests were conducted. First, in the absence
iation effects of DMP were statistically significant (Baron & Kenny, 1986). of the mediation of DMP, the total effect was tested for each one of the

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IS-related capabilities. The results were found insignificant for IS-IC, but make further progress in this direction using relevant mediating vari-
positively significant for IS-HRC and IS-AC. Second, the full model was run ables in opening up the black box of the relationship between IS
to identify the mediating effect of DMP on FP. The test results showed that capabilities and performance. To this end, the present study makes a
the link between DMP and FP did not indicate any significant effects. progress in this direction. The novelty of the study lies in the fact that it
Thus, no support was found for H4a, H4b, and H4c. Fredrickson and considers the joint mediating effect of both DMP and BPER in the IS
Mitchell (1984) note that there is a negative relationship between DMP capabilities-FP relationship through a multiple mediation model.
and FP in an unstable environment, but a positive relationship is expected The test results confirm the proposed serially mediating model,
in a stable environment. However, the results are unable to verify either of according to which DMP and BPER play a critical serial mediating role in
these cases. In other words, DMP itself is not enough to mediate the links the IS-HRC and IS-AC, and FP relationships. No support, however, has
between IS-related capabilities and FP. been found concerning the serial mediation effect between IS-IC and FP.
In order to test the serial multiple mediation models denoted by The results obtained have theoretical as well as practical consequences.
H5a, H5b, and H5c (γ´´5a = γ1a*β1*β2, γ´´5b = γ1b*β1*β2 and γ´´5c
= γ1c*β1*β2), we first tested the mediating roles of DMP and BPER 5.1. Theoretical contributions
separately on the relationship between IS-HRC and FP, as well as IS-AC
and FP. They were found not significant, as shown on the first two rows This study contributes to the adoption of RBV in IM research from
of Tables 5a and 5b, respectively. Then, the total effect of each IS-IC, IS- many respects. IT/IS infrastructure is an imitable resource easy to
HRC, and IS-AC on FP in the absence of the mediators (DMP and BPER) access in the market with many substitutes. By itself, building IT/IS
in the conceptual model was checked. As noted earlier, the results were infrastructure is not enough for a firm to create sustained competitive
found to be insignificant for IS-IC, but positive and significant for advantage. However, IS-HRC and IS-AC are idiosyncratic firm attri-
IS-HRC and IS-AC. Next, the full serial mediating effects were tested butes. They are valuable and rare, so imperfectly imitable because of
under the presence of the mediators. The direct relationships between the causally ambiguous and socially complex nature of the constructs.
IS-related capabilities (IS-IC, IS-HRC, and IS-AC) and FP were found to Moreover, to remark about the capabilities built on human resources
be insignificant. The indirect effect of IS-IC was also found insignificant and administrative aspects of IS, they should penetrate to decision-
since the relationship between IS-IC and DMP was insignificant. making and business processes of a firm to increase the performance of
Therefore, there is no support for H5a with respect to the serial these processes, as well as the overall FP. The serial mediation model
mediation effect between IS-IC and FP. However, the indirect effects of developed in this study makes an original contribution to RBV by
IS-HRC and IS-AC on FP via DMP and BPER together were noted to be opening the black box concerning the relationship between the IS-
positive and significant. Moreover, the serial mediating effects were related capabilities and FP by setting DMP and BPER as the missing
calculated by multiplying the unstandardized regression weights of the keys.
effects, γ1b ∗ β1 ∗ β2 = 0.23 for IS-HRC, and γ1c ∗ β1 ∗ β2 = 0.26 for IS capabilities provide firms with access to rapidly available, timely,
IS-AC, as the details are shown in Tables 5a and 5b, respectively accurate, and comprehensive information in order to identify their
(Taylor, Mackinnon, & Tein, 2008). The estimates of the serial multiple problems as well as seize the market opportunities. Managers who
indirect mediation effect were found significant (p < 0.05). Thus, gather information and knowledge and make decisions through the
these findings support the full serial mediating role of DMP and BPER implementation of analytical techniques are more effective than those who
for H5b and H5c. The distinctive serial relationship of DMP and BPER do not (James & Mark, 1996). As indicated by this study, IS capabilities are
together establishes a link between IS-HRC and IS-AC, and FP. envisaged to enhance the DMP of the firms. However, the study finds out
As for the control variables, only IND was found to significantly that IS-HRC and IS-AC help to improve DMP but IS-IC does not. This
influence FP (p < 0.05) where firms operating in manufacturing clearly illustrates that IT infrastructure itself develops an ability to
industries had a better level of FP as compared to firms in service disseminate the necessary knowledge within the organization, but this is
industries. not sufficient to improve the DMP. Presence of a strong IS-AC and IS-HRC
A summary of the level of support for the study’s hypotheses is for the entire firm is what really matters for DMP. Consequently, these
shown in Table 6. findings underline the distinctive nature of IT/IS infrastructure as an
imitable resource, and thus highlight the importance of IS-HRC and IS-AC
5. Discussion for DMP.
The results of the study indicate that superior DMP helps firms to
The past two decades have witnessed a remarkable growth of stu- make accurate and timely decisions, and aligns their business processes
dies and advances in our understanding of IS resources or capabilities better with their objectives. Therefore, the improved DMP increases the
and organizational performance. Recent studies highlight the need to efficiency and effectiveness of business processes in a firm through

Table 6
Summary of support for the study’s hypotheses.
Hypotheses Explanation Level of support

H1a IS infrastructure capability (IS-IC) is positively associated with decision-making performance. Not Supported
H1b IS human resource capability (IS-HRC) is positively associated with decision-making performance. Supported
H1c IS administrative capability (IS-AC) is positively associated with decision-making performance. Supported
H2 Decision-making performance is positively associated with business-process performance. Supported
H3a Decision-making performance mediates the relationship between IS-IC and business-process performance. Not Supported
H3b Decision-making performance mediates the relationship between IS-HRC and business-process performance. Supported
H3c Decision-making performance mediates the relationship between IS-AC and business-process performance. Supported
H4a Decision-making performance mediates the relationship between IS-IC and firm performance. Not Supported
H4b Decision-making performance mediates the relationship between IS-HRC and firm performance. Not Supported
H4c Decision-making performance mediates the relationship between IS-AC and firm performance. Not Supported
H5a Decision-making performance and business-process performance serially mediate the relationship between IS-IC and firm performance. Not Supported
H5b Decision-making performance and business-process performance serially mediate the relationship between IS-HRC and firm performance. Supported
H5c Decision-making performance and business-process performance serially mediate the relationship between IS-AC and firm performance. Supported

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faster customer responses and simplified customer-centric operation adopted to search for ways to exploit information and knowledge more
designs. This direct positive relationship between DMP and BPER leads efficiently (Aydiner et al., 2019). People have access to extremely
us to a superior BPER. capable technologies, such as highly proficient enterprise applications
While there are mixed results in the literature about the direct that exist throughout organizations with vast resources. Porter (1985)
versus indirect effects of IS-related capabilities on BPER (Elbashir et al., notes that the imprudent integration of IT systems may not provide the
2008; Ray, Muhanna, & Barney, 2005), the findings of this study pro- desired result of increased competitiveness (Tippins & Sohi, 2003). The
vide no support for either direct or indirect effect of IS-IC on BPER. reason that the direct effect of IS-IC is not supported may be explained
However, there is a support for the mediating role of DMP between IS- by the shortfall of the IT itself to generate business value. Nonetheless,
HRC and BPER, as well as IS-AC and BPER. This full mediation effect of the integrated resources and competencies that comprise IS-HRC
DMP on IS-HRC and IS-AC emphasizes the critical role of decision- and IS-AC need to be considered by organizations. From a practical
making for the BPER. The development of IS-HRC and IS-AC in an or- perspective, this study demonstrates that having IT infrastructure only
ganization creates a necessary infrastructure to make better decisions is not a “silver bullet.” Tangible and intangible capabilities of IS should
that are aligned with the organizational objectives. These capabilities be present all together in order to have a coherent strategy deployment,
will increase the effectiveness and efficiency in the business processes so that IS capabilities may produce business value and maintain the
of a firm, and lead to the delivery of superior BPER (Luo et al., 2012). competitiveness of a firm in the market. In addition to the hardware/
Despite the common belief about the presence of a positive direct re- software infrastructure to disseminate information within the organi-
lationship between IS-related capabilities and FP in the literature zation, the IS-HRC to apply and maintain the technological solutions,
(Peppard, Lambert, & Edwards, 2000; Ravichandran & Lertwongsatien, and IS-AC to plan, organize, and integrate business objectives into
2005; Wade & Hulland, 2004), this study denotes the serial mediation business processes are unavoidable capabilities for a successful IS.
effect of DMP and BPER together on the links between IS-HRC and IS-AC, Ongoing investments in evolving capabilities push organizations
and FP. There are various consequences of these findings. There is no to utilize the technology and the IS solutions in their business. These
doubt that infrastructure is the backbone for all IS efforts, but it is, by additional investments should provide explicit and measurable value
itself, not enough to contribute to the FP. IS systems should be supported through the release of organizational capabilities for their contribution to
with IS personnel with adequate quality and skill sets. Administration of IS FP (Peppard & Ward, 2004). This study emphasizes that investments in IS
should also be present to decide which tools to implement in which areas capabilities should support decision-making and business processes to
of business, at which level of capacity to achieve the objective of the or- improve their performance with intangible assets because both establish
ganization. Notably, these resources should be converted into a capability the organizational backbone to enhance the strength of a firm. Improved
to the extent that decision-making processes should help the firm to make DMP is also not enough by itself to enhance the FP of a firm in today’s
better decisions regularly, and business processes should be capable of competitive market. IS capabilities should penetrate strategically every
satisfying the needs of the organization consistently. Under these aspect of the firm to leverage the investments in IS to create an impact on
circumstances, IS capabilities will contribute to the FP. This finding is also FP. The findings suggest that a firm leaving any one of them out may end
consistent with Rai, Arikan, Pye, and Tiwana, (2015) who emphasize the up with failure to reach the expected performance gains. Likewise, the
importance of strategic fit for a firm developing IT-enabled process distinct but integrated model as suggested in this study highlights the need
integration capability to create business value. for good alignment of IS-HRC and IS-AC as well as IS-IC with a strong
Many previous studies have focused on organizational capabilities, but strategy deployment to distinguish a firm from its competitors.
failed to address the decision-making explicitly. Instead, decision-making
has been considered under business-process performance (Elbashir et al., 6. Conclusion
2008). In this study, DMP is considered as a separate construct, and its
essential role to link the IS capabilities to BPER is underlined. Thus, this Relying on RBV, the serial mediation model of this study proves that
study also provides evidence that IS capabilities related to IS support staff multiple constructs can be linked serially to obtain the desired output of
and IS administration enhance the quality, speed, and effectiveness of the the model. The results in general confirm the existence of pure serial
strategic and operational level decisions. This will enable a firm to identify mediation in the proposed framework by opening the black box of the
problems faster, foresee the opportunities for economies of scale, find al- relationship between IS capabilities and FP through DMP and BPER.
ternative uses of resources, save costs, achieve better labor productivity, In order to yield a business value, IS capabilities should positively
and determine new distribution channels and markets. Improved DMP, leverage the decision-making processes. In the pursuit of a company’s
then, leads to more efficient business processes that focuses on faster goals, the improvement of its DMP is a critical management activity. The
consumer responses. All these efforts have impact on return on sales, empirical results of this study support the conclusion that intangible assets
distribution costs, market shares, return on investment, administrative of IS-related capabilities, IS-HRC and IS-AC, are important elements for
expenses, inventory levels, staff costs, and customer satisfaction and boosting DMP. A company with timely and accurate data enhances its
loyalty, which all together contributes to improve the FP. ability to analyze and judge business opportunities and make decisions for
Finally, as an emerging country, Turkey is very well known for its business actions based on the facts, rather than intuition.
growing level of investment activity in IT/IS. This study proves that One of the notable findings of the study is that there is no empirical
technology investment itself is not enough to create a competitive support for a direct relationship between IS capabilities and FP under
advantage, even in the context of emerging country markets where such the proposed model. Likewise, DMP itself does not mediate the re-
investments are envisaged to directly contribute to superior FP. lationship between each of the underlying dimensions of IS capabilities
Furthermore, highlighting the strategic importance of IS-HRC and (i.e. IS-IC, IS-HRC, and IS-AC) and FP. As widely acknowledged by the
IS-AC, the present study provides guidance for emerging country firms literature, the result also supports the finding that DMP does not have a
to invest in building tacit capabilities to gain competitive advantage direct link with FP, which necessitates the presence of the other factors.
with better FP, not only in the local market, but also in the global However, DMP supported by intangible IS-HRC and IS-AC is expected to
markets. improve goal-seeking activity in a firm, and to assume an active role to
reengineer the business processes to enhance their performances as well
5.2. Managerial implications as FP. Otherwise, DMP without having any implication in the business
practices of a firm will not produce any value-added outcome.
The findings have implications for managers and policymakers. Similarly, IS-IC as a tangible asset itself does not improve decision-
Firms that continuously invest in technology remain active in a highly making capacity and as FP. Therefore, sound decisions in the absence of
fluctuating and competitive environment. Advanced IS capabilities are reasonable BPER do not lead the firms to improved FP. The study

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concludes that the operational and organizational capabilities for focuses on the behaviors of both developed and other emerging country
business processes are sustained only by DMP. Therefore, BPER through firms may provide interesting observations by allowing comparisons.
the DMP with the impact of intangible IS-HRC and IS-AC helps to build Relying on a single respondent from each company constitutes another
a sustainable competitive advantage and improves FP through better limitation of the study, and a similar study could be implemented with
utilization of a firm’s resources and competencies. more than one respondent to better understand the behaviors of dif-
ferent people and departments with respect to IS capabilities and also
6.1. Limitations and future research directions to circumvent CMV bias. A longitudinal approach may be utilized to
ascertain the differences before and after IS. The serial mediation model
This study proposes some valuable insights and important empirical adopted in this study can also be improved in future research
findings through the serial mediation model in the IM field; none- initiatives. In addition to using two serial mediations, a number of
theless, some caution should be exercised when interpreting the results. moderators could be tested to identify the behavior in more complex
The choice of Turkey as the survey setting creates a limitation because relationships. For instance, innovation performance and firm culture,
it hinders the generalizability of the study’s findings. Although Turkey which may affect FP and competitive advantage, could be the subject of
is classified as a sizable emerging country, its cultural, historical, and future research. Both DMP and BPER could also be used as moderators
institutional realities may create obstacles to the generalizability of the in examining the relationship between IS capabilities and firms per-
findings from a more global perspective. Hence, future research that formance.

Appendix A. CFA results

Constructs Items Model AVEb CRc Cronbach's

SRWa Alpha

Information System Capabilities

Infrastructure Capability IS-IC 0.51 0.86 0.77
Our IS infrastructure is suitable for developing customized software applications when the need arises. IS-IC1 0.57
Our IS infrastructure is able to respond quickly to the requests from internal and external customers. IS-IC2 0.77
The capacity of our network infrastructure is fully competent to meet our company needs. IS-IC3 0.76
Our company`s data can be shared with internal as well as external units of the company. IS-IC4 0.56
Our IS infrastructure is highly secure to protect our company from intruders and hackers. IS-IC5 0.82
Our IS infrastructure provides fast and flexible operations for the internet based systems. IS-IC6 0.74
Human Resource Capability IS-HRC 0.52 0.88 0.88
Our IS staff has adequate knowledge of computer based systems. IS-HRC1 0.72
Our company seeks high degree of computer based technical expertise for IS department/unit`s employees. IS-HRC2 0.51
Our IS staff has ability to learn quickly and apply new technologies as they become available. IS-HRC3 0.80
Our IS staff has the skills and knowledge to manage projects in our current business environment. IS-HRC4 0.82
Our IS staff has the ability to work closely and efficiently with our employees and customers. IS-HRC5 0.70
Our IS staff is capable of discovering potential problems rapidly in the systems. IS-HRC6 0.78
Our IS staff is capable of quickly maintaining the system whenever a failure occurred. IS-HRC7 0.69
Administrative Capability IS-AC 0.51 0.83 0.82
Our company`s IS strategy is in line with our corporate strategy. IS-AC1 0.70
Our company`s IS managers have an executive level authority. IS-AC2 0.70
Our company is able to make IS plans for internal as well as external units of the company. IS-AC3 0.73
Our IS software development process can be easily adapted to different business development projects in our company. IS-AC4 0.74
IS service quality is assessed by using appropriate performance standards. IS-AC5 0.67

Decision-Making Performance DMP 0.51 0.86 0.85

Our company communicates the results of organizational level analysis to work group and/or functional level operations to DMP1 0.71
enable effective support for decision-making.
Our company has a culture to facilitate long term strategic planning. DMP2 0.72
Our company makes strategic decisions effectively. DMP3 0.76
Our company reduces the time required to make decision. DMP4 0.58
Our company`s organizational intelligence is designed to reach accurate and comprehensive information in a timely manner. DMP5 0.75
Decisions are more consistent between various departments in our company. DMP6 0.76
Business-Process Performance BPER 0.50 0.87 0.79
Our company establishes close relationships with the customers. BPER1 0.66
Our company maintains close relationships with the suppliers. BPER2 0.48
Our company has rapid and effective internal and external coordination for its regional, national, and global activities. BPER3 0.82
The percentage of utilization of tools and equipment has been improved. BPER4 0.57
Our customers' requests have been adequately responded. BPER5 0.90
Market trends have been identified more quickly. BPER6 0.78
Our products and/or services are differentiated from those of our competitors. BPER7 0.65
Firm Performance FP 0.51 0.86 0.77
Our company has achieved a high level of return on sales. FP1 0.86
Our company’s distribution cost has been reduced. FP2 0.68
Our company has increased its market share. FP3 0.75
Our company has achieved a high level of return on investment. FP4 0.77
Our company's inventory has been reduced. FP5 0.57
Our company has achieved a higher level of customer loyalty. FP6 0.60

Notes:
a
Model standardized regression weights are significant at p < 0.001.
b
Average variance extracted.
c
Composite reliability.

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