Sociotechnical synergy: how employee involvement unlocks the value of data analytics

Abstract

Despite high expectations about the benefits of data analytics (DA), our understanding of the mechanisms that drive value creation from the implementation of DA in firms remains incomplete. While some studies have suggested that innovation prowess, human resources and operational capabilities are pieces of the puzzle of DA effectiveness, how these pieces fit together remains an open question. In this research, we study the mechanisms that explain value creation through DA implementation in firms, focusing on the use of DA in operations management. We empirically address this question by analyzing firm-level data from the European Company Survey (ECS) 2013 (19,470 managers) and 2019 (18,616 managers and 1,848 employees), covering 28 European countries. We conduct four sets of robustness tests: (1) comparisons of results among the three subsamples (2013-manager, 2019-employee and 2019-manager); (2) multiple endogeneity checks; (3) alternative model specifications and (4) alternative model assessments. We present evidence showing that DA impacts firm performance primarily through the enhancement of capabilities for process and product innovation. Further, in line with sociotechnical systems (STS) theory, our moderated mediation analyses show that the value created from DA is contingent upon the presence of employee involvement practices including empowerment, development and team orientation. This research integrates DA, innovation capabilities and employee involvement within an STS framework to explain firm performance, using three large-scale, cross-sectional European datasets, going beyond the conceptual and empirical examination of DA in prior studies.