What Influences Managerial Use of Business Analytic Systems? A Theory of Performance-Driven Search

Managers use business analytic systems to search for solutions to improve future performance. However, how past performance motivates managers to undertake search for solutions is not well understood. The Behavioral Theory of the Firm (BTF) proposed that managers gather information and engage in search for a solution when they encounter performance problems. We propose a Theory of Performance-driven Search (TPS) and argue that managerial search effort is a function of combined variations in unit-level performance and variations in organizational performance. We tested our theory with managerial use of business analytic systems and monthly performance data collected from seven hospitals over a period of four years. Our findings indicate that after a decline in unit-level performance, managers’ search effort is shaped by patterns of organizational performance. We also find that managers’ search response to sustained decline is quicker when decline in organizational performance is steep and sustained. Consistent with hypotheses proposed by the TPS, our findings extend our understanding of managerial search behavior and have important implications for organizations’ efforts to create business value from the use of analytic technologies.