Where Does Insensitivity Lie? How IT Investment Decision Practices Shape Supply Chain Efficiency

ABSTRACT Hospitals are searching for ways to improve supply chain efficiency. Drawing on the success of supply chain digitization in other industries, hospitals have increased their efforts to digitize supply chain operations via investments in IT to address pain points associated with supply disruptions and rising costs, including supply costs that account for more than 40% of operating expenses. Prior research fails to consider how IT investment decisions are justified concerning their impact on supply chain performance when the decision‐maker sits outside the supply chain function. We draw on the Practice‐Based Theory to explain how IT investment decision practices affect hospital supply chain efficiency (SCE). We use matched survey responses from hospital CIOs and IT managers and secondary data to examine the direct and indirect effects of various IT investment justification practices on SCE. We also investigate the role of moderated mediation effects. Leveraging PBT, we establish a different type of organizational practice in the supply chain management and logistics literature: IT investment justification practices. We extend the PBT and empirically challenge the implicit assumption that supply chain performance is not sensitive to IT investment decisions. Further, we demonstrate which IT investment justification practice is more beneficial to supply chain efficiency.