Information Technology Integration, Extent of ABC Use, Business Strategy, and Performance

By Adam S. Maiga

A review of prior research reveals mixed results with respect to the organizational performance achieved from both Information Technology (IT) integration and Activity-Based Costing (ABC). Drawing from information systems, accounting, marketing, and management literature, this study extends prior studies and uses structural equation modelling (SEM) to assess whether manufacturing plant IT integration impacts its extent of ABC use and whether there is a direct relation between both IT integration and extent of ABC use and plant performance, or whether both IT integration and extent of ABC use impact plant performance through low-cost and product differentiation strategies.

Overall, the results indicate support for the theoretical framework. Plant IT integration significantly affects the extent of its ABC use, and both IT integration and extent of ABC use significantly affect low-cost strategy and product differentiation strategy that, in turn, impact both market performance and profitability. Market performance is also found to significantly impact profitability

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