Information system theory describes about the theoretical knowledge of computer sciences. It is system that process the knowledge related to a particular study. The information system theories effectively contribute in creating, building, compiling, organizing and transferring data into the information to make better results from the research. There are several IT theories that can be used to get good outcomes such as agency theory, game theory, organizational information processing theory and knowledge-based theory of the firm (Lerner, 2004). The data, information and knowledge are quite similar words that are used in the firm. All these words have different meaning due to their use in the IT theories (Nickerson & Zenger, 2004). Data refers to the records that are used to refer the statistical observation and collection of components. Thus, data is the collection of evidence that is used to record for the purpose of firm. On the other hand, information is the process that is used in different forms. Generally, information is considered as the meaningful data that are appropriately converted and managed by the organizational managers with the use of conversion process. It is perceived as potentially signifying something and a process of informing that is used to develop sustainable resources. At the same time, knowledge describes about what someone knows, what they believe etc.
Knowledge is the relationship between data and its elements that are collected from the information. Thus, knowledge is proper collection of information that is useful for the organizational purpose to attain competitive advantage and superior performance. In a real world situation, it can be described that when anyone memorizes any information, then it combines the knowledge (Liew, 2007). Knowledge also has useful meaning for the information that is settled in the mind of a human. In computer phrasing, all the application contains stored knowledge that is exercised by applicants. From the list of IT theories, knowledge-based theory of the firm is selected as an IT theory. This theory contains the most important strategic resource of the firm that is information. Information is the processed data that is converted into the data to use in a firm. The supporter of this theory argued that it is a quite difficult and socially complex theory to sustain competitive advantages and superior corporate performance from the market (Leonard & Swap, 2005). This theory is based on the heterogeneous knowledge and information of the firm. In this theory, the firm to take strategic actions effectively uses knowledge. Information is gathered by the organization from the organizational people.
The data is quite applicable in the knowledge-based theory of firm, because data is the important part of the organizational processes. These data are used by the organization to make identity, policies, routines, documents, systems for the organization and its employees. The data is recorded and reported by the organizational people (Leonard & Swap, 2005). The subordinates provide this data to its superior that is maintained by the top managers. For example, all the firms use the financial and accounting data to take further data. Strategic management is another way that develops and expands the resource-based view of the firm (Levinson, 2007). Thus, it requires the data as well as information to improve the knowledge based on the resources. All three terms are different from each other due to use in the knowledge based management theory. It is because knowledge can be memorized, but data cannot be memorized since it is not properly managed by anyone. The knowledge provides the effective results by applying knowledge-based theory of firm. At the same time, organization uses the information by converting organizational data into information form (Liew, 2007).
1. Leonard, D. & Swap, W. (2005). The Knowledge Coach. HBS Working Knowledge. Retrieved March 6, 2012 from: http://hbswk.hbs.edu/item/4562.html.
2. Lerner, V.S. (2004). Introduction to information systems theory: concepts, formalism and applications. International Journal of Systems Science archive, 35 (7), 1-10. 3. Levinson, M. (2007). Knowledge Management Definition and Solutions. Retrieved March 6, 2012 from
http://www.cio.com/article/print/40343. 4. Liew, A. (2007). Understanding Data, Information, Knowledge And Their Inter-Relationships. Journal of Knowledge Management Practice, 8 (2), 1-8. 5. Nickerson, J.A. & Zenger, T.R. (2004) A Knowledge-Based Theory of the Firm: The Problem Solving Perspective. Organization Science 00 (0), 1-16.