Organizational integration and the use of telecommunication technologies for internal links: an empirical investigation

ORGANIZATIONAL INTEGRATION AND THE USE OF TELECOMMUNICATION TECHNOLOGIES FOR INTERNAL LINKS: AN EMPIRICAL INVESTIGATION

LEO VIJAYASARATHY Barry University RAJIV SABHERWAL Florida International University

The strategic potential of telecommunications is now widely acknowledged. Telecommunication links can be strategically deployed for internal integration as well as interorganizational systems. However, much of the research on telecommunication use has concentrated on interorganizational systems. Little empirical research has been conducted on internal use of telecommunication and its impact on organizational performance. This paper examines the effects of five key variables-environmental uncertainty, size of the organization, value chain information intensity, product information intensity, and information system (IS) maturity-on organizational integration, internal telecommunication use, and the impact of telecommunication links on organizational performance. Nine hypotheses concerning these relationships are proposed and empirically tested. Data for the study were collected from two mail surveys and some secondary sources. Results show that organizational integration is positively associated with both environmental uncertainty and the size of the organization. lnternal telecommunication use was found to be positively related to product information intensity and IS maturity. Finally, the impact of telecommunication links on organizational performance was associated with IS maturity and the interaction of organizational integration and internal telecommunication use. Some implications for future research and practice are examined.

The potential impact of telecommunication technology on organizations has increased drastically in the last decade. Telecommunication has evolved from being a back-office Direct all correspondence Shores, FL 33161.

to: Leo Vijayasarathy, Andreas School of Business, Barry University, Miami

The Journal of High Technology Management Research, Volume 5, Number 1, pages 77-99. Copyright @ 1994 by JAI Press, Inc. All rights of reproduction in any form reserved. ISSN: 1047-8310.

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utility to a strategic business resource which, if properly utilized, can provide organizations with a significant competitive advantage (Clemons & McFarlan, 1986; Keen, 1988). Numerous case examples have been provided to illustrate the growing strategic potential of telecommunications (Buday, 1986; Clemons & McFarlan, 1986; Hammer & Mangurian, 1987; Harris, 1985; Keen, 1988). In several popular cases, telecommunication technology has provided strategic benefits by improving the coordination of business activities across organizations. Interorganizational telecommunication links between an organization and its customers or suppliers enhance the efficiency of interorganizational transactions and often lead to competitive advantage (Johnston & Vitale, 1988). Considerable research attention has been recently focused on such interorganizational applications of telecommunication technology. Relatively little research has however been done on internal utilization of telecommunication technology, i.e., the use telecommunication technologies to connect the various units within the organizational boundaries. Research has been especially lacking on the factors that affect the extent to which an organization uses internal telecommunication links and the extent to which these links impact its performance. Such questions concerning internal telecommunication links are the subject of our study in this paper. Internal telecommunication use is important because it facilitates organizational integration by increasing the ability of the members of the organization to share information across geographically diverse units (Lee & Leifer, 1992). Xerox, for example, used a telecommunication network connecting its design, engineering, and manufacturing personnel to create a team focusing on one product (Scott Morton, 199 1, p. 13). The organizational integration associated with such internal telecommunication links helps improve organizational performance. This may be through enhanced organizational efficiency, by causing compression of time and space, or through organizational effectiveness, in terms of more creative decision making and a greater ability to offer an “integrated product” based on interrelated activities (Venkatraman, 1991, 133). The primary interest in this paper is in the interrelationships among organizational integration, internal telecommunication use, and the impact telecommunication links have on organizational performance. In addition, the paper examines some of the factors that may explain the differences in the use and impact of internal telecommunication links. In order to enhance the effectiveness of such telecommunication use it is essential to understand the conditions that facilitate internal use of telecommunications technology and the factors that make such use more successful. The effects of five factors, namely environmental uncertainty, size of the organization, value chain information intensity, product information intensity, and information systems (IS) maturity, are examined. The specific objectives of the paper are to empirically examine the following relationships: a) b)

the relationship of organizational integration with environmental uncertainty and the size of the organization; the relationship of internal telecommunication use with organizational integration, value chain information intensity, product information intensity, and IS maturity; and

Organizational Integration and Telecommunications

c)

the relationship of organizational level of internal telecommunication maturity.

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impact of telecommunication use with the use, organizational integration, and IS

In the next section, the literature on telecommunication-based intraorganizational and interorganizational systems is discussed. This is followed by a section presenting the research model. In this section the factors related to organizational integration, internal telecommunication use, and organizational impacts of such use are examined and the research hypotheses are proposed. This development of the research model is followed by a discussion of the research methodology, including the data collection procedures and operationalization of the research variables. The subsequent section presents the data analysis and results. We conclude the paper by identifying some of its limitations and discussing its future implications.

LITERATURE

REVIEW

Rapid progress in telecommunication technology over the last decade has led to a considerable increase in its use for intraorganizational and interorganizational coordination. The ability to share information and skills across large geographic distances has been significantly enhanced, leading to greater utilization of teams comprised of members at diverse locations, either within the same organization or across multiple organizations (Scott Morton, 1991, p. 12). Several articles on the utilization of telecommunication links have focused on interorganizational integration. Such articles have applied Porter’s (1980, 1985) concepts of value chain and key competitive forces to highlight the strategic potential of telecommunication links between an organization’s value chain and those of its customers and suppliers (Cash & Konsynski, 1985; Johnston & Carrico, 1988; Porter & Millar, 1985). Telecommunication links of an organization with its customers provide uniqueness to its products/services and increase the customers’ cost of switching to alternative suppliers, while telecommunication links with suppliers provide competitive advantage by lowering the organization’s costs of searching for and switching to alternative suppliers (Bakos & Treaty, 1986; Johnston & Vitale, 1988). Moreover, the potential of such telecommunication links to increase an organization’s bargaining power with respect to its customers or suppliers has been indicated (Johnston & Vitale, 1988). In addition to the articles highlighting the benefits of interorganizational telecommunication links, several articles have examined the contextual factors that affect such telecommunication use. These contextual factors characterize the external environment, the organization, and the IS function. Examples of such factors include environmental uncertainty (Johnston & Carrico, 1988), product information intensity (Porter & Millar, 1985), and IS maturity (Johnston & Carrico, 1988). While there has been some research on the antecedents of interorganizational telecommunication use, little investigation has been done on the factors affecting the use of telecommunication technology to link units within the organization. The research that has been conducted on internal telecommunication use can be divided into two broad categories, as discussed below.

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Considerable research has been conducted in laboratory settings to examine the effects of telecommunication technology on inter-personal communication behavior. Such research shows that telecommunication filters out social cues that are normally available in face-to-face communications, and produces unregulated asocial behavior (e.g., Kiesler, Siegel, & McGuire, 1984; Siegel, Dubrovsky, Kiesler, & McGuire, 1986). However, the results from such laboratory studies have not been replicated in field studies (e.g., Sproull & Kiesler, 1986; Zuboff, 1988), probably because prior social relationships and task knowledge affect communication in organizations in a fashion which cannot be adequately captured in laboratory studies (Culnan & Markus, 1987). This stream of research has also been criticized for excluding contextual variables such as size of the organization and environmental uncertainty (Culnan & Markus, 1987). Some other researchers have examined the effects of telecommunication technology on organizationalperformance. Largely based on one or a few case studies, this research has shown that internal telecommunication links can provide strategic benefits through greater centralization and tighter control (Sviokla, 1990), vertical integration (Galbraith, 1973) and improved coordination of effort across functions and across geographically dispersed units (Lawrence & Lorsch, 1967; Rockart & Short, 1989). Two limitations of these streams of literature may be pointed out. First, there has been little research on the relationship of organizational integration with telecommunication use, even though organizational integration is widely emphasized in conceptual IS literature (e.g., Scott Morton 1991; Venkatraman, 1991). We seek to address this limitation by explicitly examining organizational integration and its relationship with the use and impact of internal telecommunication links. A second limitation of the above two streams of research is that they have given little attention to the contextual factors that may affect the use and impact of internal telecommunication links. This paper examines the effects of five factors-size of the organization, environmental uncertainty, product information intensity, value chain information intensity, and IS maturity.

THE RESEARCH

MODEL

This section begins by examining the five contextual factors. The three outcome variables-organizational integration, internal telecommunication use, and the impact of telecommunication-are then discussed along with the research hypotheses relating them to each other and to the contextual factors. The overall research model is presented in Figure 1. The Contextual

Factors

The framework of IS research proposed by Ives, Hamilton, and Davis (1980) included external environment, organizational characteristics, and the IS function as influencing IS development and use. These dimensions of the context are also relevant for internal telecommunication use. The characteristics of the host organization as well as its business environment may be expected to influence the use and impact of internal telecommunication use (Johnston & Carrico, 1988; Lederer & Mendelow, 1990). Moreover, IS is a subunit with distinct characteristics, such as specific goals, and

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Environmental Uncertainty

Size of the Organization

Organizational Integration

H2 c

I

,

Value Chain Information IntSt-lSity

Product Information Intensity

-

H5 *

Internal Telecommunication

IS Maturity

Contextual

Nom:

Organizational

HB’

Impact of

Telecommunications

Use

H9

Variables

The hypothesis for each relationship in the model is shown beside the corresponding arrow. *H8 - The impact of telecommunication links on organizational performance is positively inrerocrion of internal telecommunication use and organizational integration.

associated

with the

FIGURE 1 The Research Model personnel (located in either a centralized IS areas) and other resources (usually including this subunit plays an important role in the telecommunication links, its characteristics of such links. The context is thus considered

4 b)

c>

department or within functional/product an annual budget, equipment, etc.). Since development and deployment of internal would also influence the use and impact as comprising of:

the company’s external environment, representing the industry in which the company operates, including competitors, customers, suppliers etc., (Johnston & Vitale, 1988; Lederer & Mendelow, 1990; Vitale, Ives, & Beath, 1989); the intraorganizational environment outside the IS function (Lederer & Mendelow, 1990); and the company’s IS function itself (Benbasat, Dexter, & Mantha, 1980; Sullivan, 1985; Vitale, Ives, & Beath, 1989).

To represent these three components of the context, five contextual factors, namely environmental uncertainty (Johnston & Carrico, 1988; Vitale, Ives, & Beath, 1989), size of the organization (Lee & Leifer, 1992), product information intensity and value chain information intensity (Johnston & Carrico, 1988; Porter & Millar, 1985; Sabherwal & King, 1991), and IS maturity (Johnston & Carrico, 1988; King, Grover, & Hufnagel, 1989; Runge, 1988), were selected based on the review of the literature.

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The external environment was characterized using environmental uncertainty. It has been argued that companies in uncertain environments can deal with this uncertainty by creating interorganizational links with customers and suppliers (Johnston & Vitale, 1988). Environmental uncertainty may be conceptualized as having two dimensions (Duncan, 1972; Miller & Friesen, 1982, 1983): (a) heterogeneity or complexity reflecting the variations among the firm’s markets that require diversity in production and marketing orientations, and (b) dynamism or rate of change and innovation in the industry and the unpredictability of the activities of the competitors and customers. Uncertainty may then be assessed by summing scores from complexity (or heterogeneity) and dynamism subscales (Duncan, 1972). Three factors, size, product information intensity and value chain information intensity, characterize the organization (Cash & McLeod, 1985; Porter Ba.Millar, 1985; Wynne, 1989). Size of the organization was considered important because in large organizations there is a greater need to coordinate activities across various sub-units, and the ability to share information is consequently more critical (Lee & Leifer, 1992). Information intensity has been defined as “the degree to which a strategic business unit or line-of-business organization’s value-added stream is a function of both information utilized and information delivered” (Wynne, 1989, p. 125). Porter and Millar (1985) have explained information intensity as a function of the “information content of the product” and the “information intensity of the value chain.” Product information intensity indicates the extent to which the organization’s customers utilize information for the selection, purchase, use and maintenance of its products/services (Porter & Millar, 1985). On the other hand, value chain information intensity represents the extent to which the organization requires information to acquire, manufacture, distribute, sell, and maintain its products/services (Porter 8~ Millar, 1985). It should be noted that although information intensity can also be evaluated at the industry level (Porter & Millar, 1985; Sabherwal & King, 1991) we assessed product and value chain information intensities at the organizational level. Finally, one factor, IS maturity (Barrett & Konsynski, 1982) was used to characterize the IS function. This variable incorporates the various attributes of IS considered critical to the identification of strategic IS applications, such as top management’s knowledge of IS and involvement of senior IS executives in the company’s strategic planning (Johnston & Vitale, 1988; Lederer & Mendelow, 1990). A high level of IS maturity thus represents the progress of the IS function into the “strategic IS”era, from the eras of data processing and management information systems (Ward, Griffiths, & Whitmore, 1990). Organizational

Integration

Organizational integration may be defined as “the quality of the state of collaboration that exists among departments that are required to achieve unity of effort by the demands of the environment” (Lawrence & Lorsch, 1967, p. 11). Lawrence and Lorsch (1967) have emphasized the role of integration in managing concurrence of effort between adjacent functions in an organization’s value chain. Lawrence and Lorsch found that the successful organizations operating in uncertain environments were highly integrated. Organizational integration is an important way of dealing with environmental uncertainty (Duncan, 1972; Miller & Friesen, 1982,1983).

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Organizations in uncertain environments use such integrative mechanisms interdepartmental committees, task forces, and liaison personnel to coordinate activities of interdependent departments (Galbraith, 1974; Lee & Leifer, 1992). H 1:

Organizational uncertainty.

integration

as the

is positively associated with environmental

Organizational integration may also be expected to be associated with the size of the organization. Large organizations involve greater division of labor (Khandwalla, 1977), and typically consist of more specialized departments (Blau & Schoenherr, 1971). This necessitates greater interdepartmental coordination and integration (Robey, 1991). H2:

Organizational organization.

Internal Telecommunication

integration

is positively

associated

with the size of the

Use

Because there is considerable interdepartmental communication in highly integrated organizations, such organizations can utilize internal telecommunication links to a greater extent. Telecommunication links may be used to support vertical integration within the organization (Galbraith, 1974) as well as the coordination of effort across functions and across geographically dispersed units (Rockart & Short, 1989; Sviokla, 1990). H3:

The use of internal with organizational

telecommunication integration.

links is positively

associated

The use of internal telecommunication links can also be related to the organization’s value chain information intensity and product information intensity (Cash & McLeod, 1985; Porter & Millar, 1985; Wynne, 1989). There is considerable information flow within organizations with high value chain information intensity, and such organizations may be expected to make greater use of internal telecommunication links. Moreover, organizations with highly information intensive products, for example finance/ banking organizations, can utilize timely and efficient internal flow of information to improve the quality of their products. H4:

The use of internal telecommunication links is positively with the organization’s value chain information intensity.

associated

H5:

The use of internal telecommunication links is positively with the organization’s product information intensity.

associated

Finally, IS maturity (Benbasat, Dexter, & positively related to internal telecommunication a positive association between factors related telecommunication use (Johnston & Carrico, Although little specific research has been done

Mantha, 1980) may be expected to be use. Previous research has suggested to IS maturity and interorganizational 1988; King, Grover, & Hufnagel, 1989). on the relationship between IS maturity

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and internal telecommunication use, based on the literature concerning the relationship between IS maturity and interorganizational links, a positive association may also be expected between IS maturity and internal links as well. A mature IS function would facilitate development and deployment of internal telecommunication links since the IS executives may be expected to be more proactive in looking for such opportunities and also better equipped to utilize them (Johnston & Carrico, 1988; McLean & Soden, 1977; Sabherwal & King, 1991). H6:

The use of internal telecommunication with the organization’s IS maturity.

Organizational

links is positively

associated

Impact of Telecommunications

It is important to examine the factors that affect the impact of telecommunication links on organizational performance, in terms of return on investment, cost reduction, and competitive advantage. This impact may be expected to be higher when the telecommunication links are used to a greater extent (Clemons & McFarlan, 1986; Hammer & Mangurian, 1987; Keen, 1988; Kim & Michelman, 1990). Conversely, when an organization makes little use of internal telecommunication links, the impact of telecommunications on organizational performance may be expected to be low. H7:

The impact of telecommunication performance is positively associated telecommunication use.

links on organizational with the level of internal

A positive relationship has been hypothesized between the use of internal telecommunication links and the organizational impact of telecommunication. However, this relationship may be expected to be moderated by organizational integration. That is, a high level of integration implies that the organization can derive greater benefit from internal telecommunication links than a less integrated organization would obtain from the same level of internal telecommunication use. H8:

The impact of telecommunication links on organizational performance is positively associated with the interaction of internal telecommunication use and organizational integration.

Finally, telecommunication links are likely to be more beneficial in organizations with a mature IS function. Organizations with a more mature IS function may be expected to derive greater benefits from telecommunication links because in such organizations the top management has greater awareness of information technology and its potential applications and the IS managers are more involved in the preparation of the organization’s business plans (Johnston & Carrico, 1988). On the other hand, in organizations with less mature IS functions, telecommunication use may not be aligned with the business strategy and may therefore have a lower impact on the organizational performance. H9:

The impact performance

of telecommunication is positively associated

links on organizational with IS maturity.

Organizational Integration and Telecommunicarions

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METHODS

Data Collection The data collection involved two rounds of a mailed questionnaire survey along with secondary data. Of these, the second round of questionnaire survey was used for validating the first round measure of the organizational impact of telecommunication links. Secondary data was used to measure size of the organization and to validate the questionnaire measure of environmental uncertainty. The questionnaire for the first round of survey was pilot-tested through personal interviews with senior IS executives in four local companies. These executives provided detailed feedback on the clarity of the questions and the overall comprehensibility of the instrument. They also suggested some minor changes in the wording of a few questions. After incorporating their suggestions, the questionnaire, along with a cover letter explaining the nature of the study was mailed to senior IS executives of 425 medium-sized (annual sales of $200 million to $600 million) U.S. companies, randomly selected from Compact Disclosure. The names and titles of the IS executives were obtained from Standard and Poor k Register of Corporations (1989). Sixteen of the target respondents declined to participate in the study. The main reasons cited were time constraints and company policy. Eighty-six senior executives completed the questionnaires for a response rate of 20.24 percent. Two responses were unusable due to insufficient data. The other 84 responses were used in the data analyses. Table 1 provides a profile of the respondents. Seventy-seven percent of the known respondents were MIS/telecommunication executives. Senior executives provided the data: eighty percent of the known respondents were vice presidents or directors.

TABLE 1 Titles of Respondents MIS/ Telecommunications

Title Vice President Director Manager Anonymous Total

Other

Total

23 17 14

II 5

54

16

34 22 14 14 84

TABLE 2 Industry Types of Respondent Firms Industry

Classification

Manufacturing Transportation/communication Utilities Wholesale/ Retail Trade Finance/ Insurance/ Real Estate Others Anonymous Total

Frequency 23 4 16 6 15 6 14 84

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Table 2 summarizes the industry types of the responding organizations. About onethird of the known respondents were from manufacturing companies. Utilities comprised another large portion of the sample, providing 16 of the 70 known responses. To assess whether the responding firms systematically differed from those who did not respond, data on key organizational attributes such as number of employees, net sales, net assets, and growth rates of respondent and nonrespondent companies were obtained from Compact Disclosure and Standard and Poor’s Register of Corporations and tested for differences using t-tests. No significant differences were found between the two groups (p < 0.05). No nonresponse bias was thus detected. A second round of mail survey was conducted to validate the MIS/ telecommunication executives assessment of the impact of telecommunications on organizational performance. A very brief questionnaire was mailed to the 70 known respondents from the first round and they were requested to have it completed by a senior executive from another department (such as marketing). Responses were received from 34 (48.57%) companies. Secondary data from Compact Disclosure was used to measure size of the organization. Moreover, because there may be some concern about the ability of MIS/ telecommunication executives to adequately assess environmental uncertainty, we validated our measure of environmental uncertainty using an objective measure based on secondary data. Operationalization

of variables

The research variables were operationalized using multiitem scales. All the items were on seven-point scales. The entire questionnaire was eight page long, including the front and back covers. Table 3 provides the mean, standard deviation, the number of items and the reliability (standardized item-alpha) for each of the research variables. The intervariable correlations are also shown in Table 3. The operationalizations of the various research variables are briefly discussed below. Environmental uncertainty was measured using eight items from Miller and Friesen (1982, 1983). These items measure the two dimensions of uncertainty, namely dynamism and heterogeneity (Duncan, 1972). The first item measured the rate at which products/ services become obsolete (1 = slowly, 7 = quickly). Two items measured the predictability of (a) the actions of competitors, and (b) demands and customer tastes (1 = quite predictable, 7 = unpredictable). The fourth item measured the rate of change in the product/ process technology (1 = does not change much, 7 = changes considerably and often). The frequency of change in marketing practices to keep pace with the market and competitors was measured by the fifth item (1 = rarely, 7 = frequently). The other three items measured the differences among the companies’ products/services with regard to (a) customers’ buying habits, (b) nature of the competition, and (c) market dynamism and uncertainty (1 = not much, 7 = considerable). Examination of the scree plot (Cattell, 1966) for the principal component analysis of these eight items showed a single dominant factor; the first factor explained 52.6 percent of the variance while the second explained only 14.6 percent. The reliability for the eight-item measure of environmental uncertainty was 0.86. Furthermore, an objective measure of environmental uncertainty was computed using the procedure employed by Keats and Hitt (1988). This procedure is briefly described in the Appendix.

Uncertainty 4.03 4.30 2.86 4.24 4.93 4.35 3.92

3.34

Mean

1.58 1.24 0.89 0.83 1.44

1.52

1.73

1.16

Dev.

* n = 68 for Size and n = 84 for all other variables. The correlation coefficients exceeding 0.26 and 0.18 are significant

Size Value Chain Info. Intensity Product Info. Intensity Organizational Integration IS Maturity Internal Telcom. Use Organizational Impact

,NO/
2. 3. 4. 5. 6. 7. 8.

I. Environmental

Variable

Std.

0.58 0.64 0.87 0.85 0.79 0.65 0.77

0.86

Alpha

Std.

-0.30 0.25 0.36 0.33 0.36 0.34 0.41

1

at 0.01 and 0.05 levels (l-tailed)

2 3 4 7 IO 11 3

8

items

No. of

respectively.

-0.09 -0.04 0.15 0.07 0.07 -0.0 I

2

-0.01

0.13 0.17 0.08 0.13

3

0.27 0.23 0.38 0.29

4

5

0.62 0.29 0.44

Descriptive Statistics, Standardized Alphas, and Intervariable Correlations*

TABLE 3

0.34 0.48

6

0.31

7

3,

2 2.

f

$

& Y E a

a

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Intraclass correlation (Shrout & Fleiss, 1979) for the degree of agreement between the questionnaire and objective measures was 0.42 and the corresponding F-value was 2.44 (significant atp < 0.01 level with 54,55 degrees of freedom). The questionnaire measure of environmental uncertainty was thus validated. Size of the organization was measured using secondary data from Compact Disclosure. Two items, assessing company assets and the number of employees, were used. Both items were converted to seven-point scales for consistency with the other measures used in the study. For measuring value chain and product information intensities, the questionnaire included five and four items respectively (Cash & McLeod, 1985; Porter & Millar, 1985; Wynne, 1989). All the items ranged from 1 = very little to 7 = considerable. A principal components analysis of the nine items was conducted and the two-factor solution examined. Two items for value chain information intensity (the extent to which the company used information resources for marketing and selling and for maintaining products/services) had loadings above 0.30 on both factors. After dropping these two items, principal components analysis produced two factors with eigenvalues greater than one. These factors corresponded to our apriori expectations and explained 67.8 percent of the variance. Three items measured value chain information intensity in terms of the extent to which the company used information resources for (a) acquiring raw materials, (b) manufacturing/ processing, and (c)distributing its products/ services. Four items measured product information intensity in terms of the extent to which the company’s customers used information resources for (a) selecting, (b) purchasing, (c) using, and (d) maintaining the company’s products/services. The reliabilities for value chain and product information intensities were 0.87 and 0.64 respectively. Seven items were used to measure organizational integration (Miller & Friesen, 1982, 1983). Three items (ranging from 1 = not at all to 7 = considerably) measured the extent to which the following integrative mechanisms were used to assure the compatibility of decisions in one area (e.g., marketing) with those in other areas (e.g., production): a) b) c)

interdepartmental committees which are set up to allow departments to engage in joint decision making; task forces which are temporary bodies set up to facilitate interdepartmental collaboration on a specific project; and liaison personnel whose specific job is to coordinate the efforts of several departments for purposes of a specific project.

Another three items measured the extent to which top level decision making in the company was characterized by participative, cross-functional discussions in which different departments, functions or divisions got together to make the following class of decisions: a) b) c)

decisions concerning production, marketing and R & D strategies; capital budget decisions; and decisions concerning changes in the firm’s operating philosophy.

These items collaboration

ranged from 1 = rare use of committees to 7 = frequent use. The seventh item

or infrequent measured the

informal extent of

Organizational integration and Telecommunications

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interdepartmental interaction in decision making (1 = very little to 7 = considerable). The reliability for this seven-item measure was 0.85. IS maturity was measured using 10 items (Benbasat, Dexter, & Mantha, 1980; Sullivan, 1985). The first item assessed the number of different functions supported by using information technology (1 = very few, 7 = all of them), the second measured the extent to which mainframes/terminals, minicomputers, word processors, process control devices, micros, etc., were installed throughout the company (1 = not much, 7 = considerably), while the third item assessed the basis for IS performance evaluation (1 = cost savings only, 7 = contribution to the company’s overall objectives). Two items assessed the extent to which IS managers were informed about the company’s business plans and top management was informed about information technology (1 = uninformed, 7 = well informed). The sixth item measured the extent of information technology infusion in the company (1 = not much, 7 = considerably). The seventh item assessed the extent of formalization of IS planning (1 = quite formal, 7 = very formal). The next two items measured the extent to which IS planning took the company’s business plans into consideration and the involvement of top management in IS planning (1 = not at all, 7 = considerably). Finally, the 10th item measured the extent to which IS personnel were distributed throughout the company (1 = not much, 7 = considerably). The reliability for this IO-item measure maturity was 0.79. Internal telecommunication use was assessed using eleven items (Dordick & Williams, 1986; Gasman, 1988; Vignault, 1987). Nine items measured the extent to which the following technologies’ were used for communication within the organization (for example, a two-way link between sales staff and branches/ head office.):

a> intelligent/mobile b) cl 4 e) f-l 8) h)

9

phones; voice-data PBXs; voice oriented systems; integrated services digital network; local area networks; wide area networks; facsimile; computer communications; electronic mail.

These items were scaled from 1 = not at all to 7 = considerably. The other two items assessed the extent to which the technologies had contributed to the efficiency of the company’s internal operations and the effectiveness of the company’s decision making process (1 = not much, 7 = considerably). The reliability for this 1 l-item measure was 0.65. Finally, organizational impact of telecommunications was assessed using three items measuring how significantly telecommunication technology had contributed to the company’s overall performance of company, relative to competitors in the following areas: return on investment, cost reduction, and competitive advantage. These items were scaled from 1 = not much to 7 = considerably. The reliability for this measure was 0.77. As mentioned earlier, a second round questionnaire, completed by a different respondent, was used to further validate the measure of organizational impact of

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telecommunications. The intraclass correlation (Shrout & Fleiss, 1979) between the impact measures from the two rounds was 0.47 and the associated F-value was 2.80 (significant at p < 0.01 level with 32, 33 degrees of freedom). The first round measure of the organizational impact of telecommunications was thus validated.

DATA ANALYSIS

AND RESULTS

Stepwise multiple regression analyses, with probability-to~nter set at 0.05 (l-tailed) were used to test the research hypotheses. Whereas the intervariable correlation coefficients, which are shown in Table 3, present the simple relationships among the research variables, the multiple regressions simultaneously control for the other variables and provide the collective variance explained. Three stepwise multiple regressions were conducted using organizational integration, internal telecommunication use, and organizational impact of telecommunications as the dependent variables. The results of these three regressions are now discussed. Organizational

Integration

Hypotheses 1 and 2 related organizational integration to environmental uncertainty and the size of the organization respectively. These hypotheses were tested using a stepwise multiple regression with organizational integration as the dependent variable and uncertainty and size as the independent variables. The results of the regression are shown in Table 4. As may be seen from the Table, both uncertainty and size entered the regression equation (at p < 0.05). Thus, Hypotheses I and 2 were both supported. Although the R” for the regression was somewhat low at 17.68 percent, the corresponding F-value (6.77) was significant at the 0.005 level. Internal Telecommunication

Use

Four hypotheses concerned internal telecommunication use; Hypotheses 3,4,5, and 6 related it to organizational integration, value chain information intensity, product information intensity, and IS maturity respectively. These four variables were used as the independent variables in the stepwise multiple regression for internal telecommunication use. The results of this regression are shown in Table 5. Product information intensity and IS maturity entered the stepwise regression (at p < O.OS), but organizational integration and value chain information intensity did not. Thus, Hypotheses 5 and 6 were supported while Hypotheses 3 and 4 were rejected. The R2 for the regression was 21.25 percent, and the corresponding F-value (10.25) was significant at the 0.001 level. Organizational

Impact of Telecommunications

Hypotheses 7 and 9 related organizational impact of telecommunications to the extent of internal telecommunication use and IS maturity respectively. The stepwise regression for organizational impact of telecommunications included these two independent variables. Moreover, Hypothesis 8 proposed organizational impact of telecommunications

Size

Environmental ~ncer~~int~ Size (Constant)

Variable

0.4205

0.3337

~~lti~~e K

0.4418 0.1922 1.9839

B

Motr: * Both the hypothesized variables entered the stepwise regression

2.

llncertainty

Step 1. Environmental

Variable Entered

6.77

8.02

F

0.1280 0.0859 0.6386

SEB 0.4133 0.2678

Beta

Variables in the ~~uut~on’

0.1507

0.0975

Adj. R2

Eq~atjo~

0.002

0.006

Sig. ofF

3.452 2.237 3.107

t

Sig t

5.01

8.02

Change in F

Stepwise Change

0.0010 0.0288 0.0028

0.0654

0.1114

Change in RZ

Results of the Regression for Organizational Integration

TABLE 4

0.029

0.006

sig. of change in F

a

i: 3.

3 3.

2 6 a

Value

Variable

0.3832 0.4609

Multiple R

chain information

R2

B

integration

0.1690 0.2462 2.6538

0.1468 0.2125

intensity and Organizational

Product Info. Intensity IS Maturity (Constant)

Product Info. Intensity IS Maturity

Note: *

2.

I.

Step

Variable Entered 13.25 10.25

F

0.3227 0.2632

Beta

did not enter the stepwise regression.

0.0548 0.0978 0.4792

SEB

Variables in the Equation’

0.1358 0.1917

Adj. R2

Equation

0.000 0.000

ofF

Sig.

3.086 2.516 5.538

t

Sig t

13.25 6.33

Change in F

Stepwise Change

0.0028 0.0140 0.0000

0.1468 0.0656

Change in R2

TABLE 5 Results of the Regression for Internal Telecommunication Use

0.000 0.014

Sig. of change in F

Now:

2.

I.

Step

0.5418 0.5754

Integration X Internal IS Maturity (Constant)

Variable

Use

Multiple R

Use

B 0.0657 0.3485 1.4169

0.2935 0.331 I

R2 32.82 19.30

F

0.0204 0.1666 0.6622

SEB 0.3842 0.2497

Beta

Variables in the Equation’

0.2846 0.3139

Adj. R2

Equation

* internal telecommunicatmn use did not enter the stepwise regretsion.

Integration X Internal IS Maturity

Variable Entered 0.000 0.000

ofF

Sig.

3.219 2.092 2.140

t

Sig t 0.0019 0.0397 0.0355

0.2935 0.0375

Change in R2

32.82 4.38

Change in F

Stepwise Change

TABLE 6 Results of the Regression for Organizational Impact of Telecommunication

0.000 0.040

sig. of change in F

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to be associated with the interaction of organizational integration and internal telecommunication use. Therefore, the stepwise regression also included this interaction term, that is, the product of organizational integration and internal telecommunication use. The results of the regression are shown in Table 6. As may be seen from the Table, internal telecommunication use failed to enter the regression, indicating the rejection of Hypothesis 7. On the other hand, the interaction term and IS maturity entered the regression equation (at p < 0.05). Thus, Hypotheses 8 and 9 were both supported. However, it should be noted that the increase in R2 due to IS maturity was quite small (only 3.75 percent). The R2 for the regression was 33.11 percent, and the associated F-value (19.30) was significant at the 0.001 level. DISCUSSION Before we examine the implications of this research study, its limitations need to be identified. First, the results of this study may also be limited by the low (20.4 percent) response rate, although no nonresponse bias could be detected. This low response rate was partially caused by our failure to follow-up through either mail or telephone. Second, this study used a single-respondent questionnaire survey for data collection. We measured the size of the organization using secondary data, and validated our environmental uncertainty scale using an objective measure and the measure of the organizational impact of telecommunications using data from a second respondent. However, the other research variables were assessed by only one respondent from each company. Consequently, the study does not capture product and value chain information intensity, IS maturity, and internal telecommunication use with the richness that a case study or a questionnaire survey involving multiple respondents from each company might. Related to this, other objective measures, such as that used by Harris and Katz (1991) for information technology investment intensity, can enhance the results based upon perceptual measures. Finally, this study concentrated on medium-sized companies. Therefore, the results may not generalize to larger companies, such as the Fortune 500 companies, or to companies with annual sales below $200 million. This limitation is especially important because size of the organization was found to be associated with organizational integration. Although the above limitations are certainly important, we believe that the study has some important implicationsforpractice. First, the results pertaining to Hypotheses 1 and 2 support the belief that larger organizations and organizations in more uncertain environments use greater interdepartmental integration through such mechanisms as committees, task forces and liaison personnel. Although these findings have been revealed in some earlier research, they are further supported by our study of mediumsized companies. Second, the support for Hypothesis 5, along with the rejection of Hypothesis 4, suggests that while product information intensity relates to internal telecommunication use, value chain information intensity does not. An interesting implication of this finding may be that medium-sized companies use internal telecommunication links for the communication of product-related information, which explains the positive association

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between internal telecommunication use and product information intensity. On the other hand, the absence of the expected positive association between internal telecommunication use and value chain information intensity may suggest that mediumsized organizations do not make much use of telecommunication links for communicating information pertaining to the operation of their value chain activities. Third, the results for Hypotheses 3, 7, and 8 provide interesting insights into the role of organizational integration and internal telecommunication use. While the rejection of Hypothesis 3 suggests that the more integrated organizations do not necessarily make greater use of internal telecommunication links, the support for Hypothesis 8 indicates that those organizations which do so are likely to derive greater benefit than the less integrated organizations can. Organizational integration may thus be considered as creating the opportunity for using internal telecommunication links and in organizations that utilize this opportunity these links can considerably improve performance. Moreover, the rejection of Hypothesis 7, along with the support for Hypothesis 8, suggests that greater use of internal telecommunication links does not simply imply that these links would have greater impact on organizational performance; the extent of their impact would also depend on integration, being greater in more integrated organizations. This may mean that less integrated organizations should not expect telecommunication links to improve their performance unless they also increase their degree of integration. Finally, the support for both Hypotheses 6 and 9 provides further evidence of the importance of IS maturity. It is intuitively appealing that those organizations, in which IS has matured to the extent that the top management is knowledgeable about information technology and participates in its planning, make greater use of internal telecommunication links and also derive greater benefit from them. DIRECTIONS

FOR FUTURE RESEARCH

Several directions for future research are apparent from this paper. First, future research may directly compare the use of internal telecommunication links by small, mediumsized, and large companies. Such research should be useful in understanding whether small and medium-sized companies make less use of internal telecommunication links than the large companies which have received much attention in previous research. The support for our Hypothesis 2 suggests that this is true. Second, further research is needed to study the nature of the information communicated through telecommunication links and examine how it relates to product and value chain information intensities. This should provide useful insights into the reasons for our Hypothesis 5 being supported and Hypothesis 4 being rejected. Third, further investigation may be conducted on our finding that the interaction of organizational integration and internal telecommunication use is associated with organizational impact of telecommunications. This finding implies a contingency relationship between organizational integration and internal telecommunication use, especially because support was lacking for the direct relationship between these variables, as proposed in Hypothesis 3. Future research on internal telecommunication use can build on this and the other results of this paper by using objective measures of use and impact of internal telecommunication links.

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Fourth, the development and implementation of telecommunication links was considered beyond the scope of this study. Future research should study these processes because the use and impact of telecommunication links may depend on such process characteristics as the influence of the individuals championing their development. Finally, there is a need for longitudinal studies of organizations utilizing internal telecommunication links to examine the evolution of their use and understand their relationship with interorganizational telecommunication links. Such research should provide valuable insights into interorganizational telecommunication use and also facilitate planning for the evolution of the telecommunication infrastructure. Of course, any large sample research involving such longitudinal study would be very demanding in terms of research resources. The strategic potential of telecommunication links has been widely discussed in academic journals and trade publications, but little empirical assessment has been done on the antecedents of internal telecommunications use. This paper has provided some initial insights into the effects of environmental uncertainty, size of the organization, value chain and product information intensities, and IS maturity on organizational integration and the use and impact of internal telecommunication links. However, much further research is needed. We hope that this paper can contribute to such future empirical research on the use of telecommunications links.

APPENDIX Secondary

Data Measure of Environmental

Uncertainty

This measure of environmental uncertainty was computed from secondary data from Compact Disclosure (ref) using the procedure described by Keats and Hitt (1988). Their measures of environmental instability and complexity, which correspond to dynamism and heterogeneity respectively, were averaged to obtain the measure of environmental uncertainty. lntraclass correlation showed this measure of environmental uncertainty was found to be highly associated with the questionnaire measure, as discussed in the paper. The computational procedures for instability and complexity (which are identical to the procedures used by Keats and Hitt) are summarized below. The measure of instability reflects five-year (1985439) patterns of instability in the industry represented by the organization’s primary SIC code. Using annual operating income figures across all firms in each relevant industry, we treated the natural logarithms of each in a regression with time serving as the independent variable. The instability measures were then given by the antilogs of the standard error of each regression slope coefficient. The measure of complexity indicates a trend toward or away from dominance by large firms over the five year period. It is the regression of the terminal year’s (1989’s) market shares of all firms in a given industry (the process was conducted for each of the industries to which the known organizations in our sample belonged) upon their market shares in the initial year (1985). The resulting regression coefficient suggests increasing or decreasing levels of concentration in the industry.

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NOTES 1. Two additional items concerning the use of videoconferencing and teletext/videotext technologies were dropped as these technologies were used to a negligible extent (average of below 1.5 on a seven-point scale).

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