The Role of Organizational Absorptive Capacity in Strategic Use of Business Intelligence to Support Integrated Management Control Systems

TLDR

BI systems leverage enterprise databases through analytics to enhance core management control capabilities. The study investigates how knowledge‑management and resource‑development controls influence the strategic integration and use of BI systems. Results demonstrate that organizational absorptive capacity is essential for establishing the appropriate technology infrastructure and assimilating BI systems, with top‑management influence being indirect and mediated by operational managers, indicating a bottom‑up adoption that distinguishes BI from other top‑driven management‑control innovations.

Abstract

ABSTRACT: This study examines the influence of organizational controls related to knowledge management and resource development on assimilation (i.e., strategic integration and use) of business intelligence (BI) systems. BI systems use analytics and performance management concepts to leverage enterprise system databases and provide core management control system (MCS) capability. Our results indicate that organizational absorptive capacity (i.e., the ability to gather, absorb, and strategically leverage new external information) is critical to establishing appropriate technology infrastructure and to assimilating BI systems for organizational benefit. Further, findings show that while top management plays a significant role in effective deployment of BI systems, their impact is indirect and a function of operational managers’ absorptive capacity. In particular, this indirect effect suggests that leveraging BI systems is driven from the bottom up as opposed to the top down. This differentiates BI from other isolated strategic MCS innovations that have traditionally been viewed as top-management driven.