The mediating role of accounting information systems in small and medium enterprise strategies and organizational performance in Iraq

SMEs drive economic growth and innovation but in Iraq many face declining performance due to limited financial resources, low technology adoption, and weak administrative innovation. Adoption of accounting information systems (AIS) is considered critical to improve SME performance and support strategy execution, yet managers often hesitate to transition from legacy or manual systems. This study investigates whether AIS mediates the relationship between SMEs’ strategies and organizational performance in Basra, Iraq. SME strategy is conceptualized to include finance source, administrative innovation, organizational culture, developing capabilities levels of SMEs, information source, development of business managers, and technological innovation. Based on the resource-based view (RBV), the study tests four hypotheses: H1: SMEs’ strategy positively and significantly relates to organizational performance; H2: SMEs’ strategy positively and significantly relates to the use of AIS; H3: AIS use positively and significantly affects organizational performance; H4: AIS mediates the relationship between SMEs’ strategy and organizational performance.

Prior work links strategic orientation and information technology to improved SME performance, though findings vary by context. Positive associations have been reported between business strategy and firm performance (e.g., Abudaqa et al., 2022; Eiriz & Barbosa, 2022; Purbawati et al., 2023), and between AIS/ICT use and organizational performance (Ismail & King, 2005; Ismail, 2009; Mim, 2016; Yunis et al., 2018). Some studies demonstrate mediation roles for management accounting systems or AIS (Hutahayan, 2020; Latifah et al., 2020; Nassani et al., 2023). However, mixed results also exist, including negative or insignificant effects depending on strategy types or technological capability perceptions (Terziovski, 2010; Peltier et al., 2012; Pratono, 2016). In Iraq, SMEs exhibit weak strategic adoption and limited AIS implementation (Harash et al., 2014a; Kareem et al., 2019a, 2021a, 2021b, 2022). The conceptual framework is grounded in the resource-based view (RBV), which positions AIS as a critical internal resource that can enable effective strategy execution and enhance performance when aligned with firm capabilities. The study addresses a gap by explicitly testing AIS as a mediator between multi-faceted SME strategies and organizational performance in a developing-country SME setting.

Design: Quantitative, cross-sectional survey using structured, closed-ended questionnaires and purposive (non-probability) sampling limited to SMEs that use AIS. Setting and population: SMEs in Basra governorate, Iraq (economic capital), across sectors including technical/professional, agriculture, artisanal work, construction, trade, transportation and storage, automotive repair/maintenance, and others. Respondents were owners and managers (decision-makers for AIS and strategy). Sample and data collection: 450 questionnaires distributed (Mar–Aug 2023); 397 returned; 34 excluded due to incompleteness; 363 valid responses. Pilot test with 37 participants. Two experts assessed item clarity and alignment; the instrument was prepared in English and translated to Arabic by an expert. SME definitions: Small: 4–10 employees; Medium: 11–50 employees. Measures: Total 64 items on 5-point Likert scales (1 = strongly disagree to 5 = strongly agree). Constructs and sources: AIS use (5 items) and technological innovation (5 items) from Kareem et al. (2021a); finance sub-factors (8 items) from Wasiuzzaman (2019); administrative innovation (3 items) from Jiménez-Jiménez & Sanz-Valle (2011); development of business managers (4 items) and development of capabilities levels of SMEs (7 items) from UNDP (2021); organizational culture (4 items) from Valdez-Juárez et al. (2016); information source context (7 items) from Martínez-Román et al. (2019); organizational performance (6 items) from King et al. (2010); SMEs’ strategy items adapted from Li et al. (2006) and Gibcus & Zoetermeer (2003), with a 15-item evaluation instrument developed from existing tools. Data analysis: SPSS used for data coding checks, transcription error screening, and descriptive statistics. Hypotheses tested via PLS-SEM (SmartPLS 3), following a two-step approach (measurement model, then structural model). Reliability/validity: Pilot Cronbach’s alpha ≈ 0.70; in the main analysis AVE > 0.50, composite reliability > 0.80, Cronbach’s alpha ≈ 0.77. Discriminant validity supported by Fornell-Larcker and HTMT (values ≈ 0.85–0.90). Bootstrapping used to assess path significance. Demographics: 38% managers, 62% owners; 57.5% held bachelor’s degrees; firms operating >8 years; AIS experience >4 years.

• H1 supported: SMEs’ strategy → organizational performance β = 0.651, p < 0.001. • H2 supported: SMEs’ strategy → AIS use β = 0.578, p < 0.001. • H3 supported: AIS use → organizational performance β = 0.184, p < 0.001. • H4 supported: AIS partially mediates the relationship between SMEs’ strategy and organizational performance. • Model explanatory power: Adjusted R² for organizational performance = 0.594 (59.4% explained by strategy and AIS); Adjusted R² for AIS = 0.334 (33.4% explained by strategy). • Measurement quality: AVE > 0.50, composite reliability > 0.80, Cronbach’s alpha ≈ 0.77; discriminant validity met (Fornell-Larcker, HTMT ~0.85–0.90).

Findings confirm that a multifaceted SME strategy significantly enhances organizational performance and that AIS contributes directly to performance and partially mediates the strategy–performance link. Grounded in RBV, AIS functions as a critical internal resource enabling timely, accurate financial and managerial information, reducing human error, and expediting decision-making—especially under environmental volatility. The positive strategy→AIS path suggests that strategically oriented SMEs are more likely to adopt and utilize AIS effectively, aligning internal processes with strategic objectives. The mediation result implies that part of strategy’s performance impact operates through enhanced information processing and control afforded by AIS. Results align with prior evidence of positive links among strategy, ICT/AIS use, and performance, while acknowledging contrasting findings in different contexts where technological capability or switching costs may dampen benefits. For Iraqi SMEs, formalizing strategies and integrating AIS can improve competitiveness, knowledge sharing, and operational efficiency.

The study advances SME and AIS literature by demonstrating that AIS partially mediates the relationship between SMEs’ strategies and organizational performance in Iraq. It supports RBV by positioning AIS as a valuable internal resource that, when aligned with strategic initiatives across finance, innovation, managerial development, capabilities, information sourcing, organizational culture, and technology, improves performance and competitive advantage. Practically, managers and owners should prioritize AIS adoption and alignment with strategy to accelerate decision-making, enhance reporting quality, and strengthen administrative control. Future research should explore broader contexts across Iraqi provinces and other countries, incorporate online marketing and sustainability outcomes, and examine integration of AIS with AI-enabled processes and skill development, as well as potential moderators and additional strategic factors.

• Results are based on owners’/managers’ perceptions and may not reflect actual performance across different regions. • Single-province focus (Basra) limits generalizability to other Iraqi provinces or countries. • Online marketing and its impact on SME performance were not examined. • AI integration and employees’ skills to collaborate with intelligent systems were not addressed. • Sustainability dimensions (environmental and social) were not included. • Many Iraqi SMEs without AIS were excluded by purposive sampling, potentially biasing insights toward AIS users.