Strength in Numbers: How does data-driven decision-making affect firm performance?
AIS Electronic Library (AISeL) (Association for Information Systems)Published 1 January 2011
Erik Brynjolfsson, Lorin M. Hitt, Heekyung Kim
Citations57
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Abstract
We examine whether firms that emphasize decision making based on data and business analytics (âdata driven decision makingâ or DDD) show higher performance. Using detailed survey data on the business practices and information technology investments of 179 large publicly traded firms, we find that firms that adopt DDD have output and productivity that is 5-6% higher than what would be expected given their other investments and information technology usage. Furthermore, the relationship between DDD and performance also appears in other performance measures such as asset utilization, return on equity and market value. Using instrumental variables methods, we find evidence that the effect of DDD on the productivity do not appear to be due to reverse causality. Our results provide some of the first large scale data on the direct connection between data-driven decision making and firm performance.
Keywords
Business, Management and Accounting
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