The impact of business intelligence systems on profitability and risks of firms

Abstract

Researchers in the field of operations management (OM) have long advocated fact-based decision-making. The use of business intelligence (BI) systems represents a great opportunity for manufacturers to improve profitability and reduce firm risks. However, the actual business value of BI systems has remained highly controversial because integrating BI systems into production and manufacturing operations is difficult. In particular, the informational sources and operational use of BI systems require substantial internal support from employees and institutionalised incorporation of BI into operations. Using a sample of 278 manufacturing firms in the US that had used BI systems from 2005 to 2014, we examine the impact of BI systems on firms’ profitability and risks. We show that firms improve their profitability and reduce risks in profit returns directly after the operational use of BI systems. Firms with superior employee relationships and higher process institutionalisation (i.e. firms that are ISO 9000 certified) benefit more from the operational use of BI systems. We provide a resource orchestration perspective (ROP) of the resource-based view (RBV) of firms for the competitive advantage derived from the operational use of BI systems; and we ascertain the circumstances in which manufacturers are more likely to benefit from BI systems.

Keywords:

• business intelligence systems
• profitability
• firm risks
• process institutionalisation

Acknowledgment

We thank the Editors and anonymous referees for their many helpful comments on an earlier version of our paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This paper was partially supported by the Research Grant Council of Hong Kong under PolyU 155009/15B.