An Empirical Study of the Role of Big Data Analytics in Corporate Decision Making

Abstract

Bounded rationality prevents firms from achieving their full potential. However, intelligent solutions can help eliminate bias in decision making. This study examines whether biases diminish or disappear when novel and powerful digital resources, such as big data analytics, are applied in management practice. The authors use a massive matched database of 1,942 large Chinese firms to find significant and positive effects of data processing frequency on high-level metrics of rational decision-making outcomes, such as productivity and profitability. Moreover, the increase in between-firm variance is the result of both differences in firm characteristics and a widening gap in their workflows and coordinating mechanisms. Heterogeneity can effectively explain 13.18% of the marginal effect of big data analytics on firm metrics, such as productivity and profitability. The results also indicate that the human capital of the C-suite partially mediates the link between big data analytics and firm performance.