IT capabilities and firm performance: A contingency analysis of the role of industry and IT capability type

Previous empirical studies examining the relationship between IT capability and accounting-based measures of firm performance reported mixed results. We argued that prior work has relied on aggregate overall measures of the firm's IT capability, ignoring the specific type and nature of IT capability; and also has not fully considered important environmental conditions that influence the relationship. Drawing on a resource-based view, we advanced a contingency perspective and proposed that IT capabilities' impact on firm resources was contingent on the ''fit'' between the type of IT capability/resource a firm possesses and the demands of the industry in which it competes. Specifically, using publicly available rankings as proxies for two types of IT capabilities (internally and externally focused), we empirically examined the degree to which three industry characteristics (dynamism, munificence, and complexity) influenced the impact of each type of IT capability on measures of financial performance. After controlling for prior performance, we found there was general support for the posited contingency model. The implications of these findings are also discussed.

[1]  Charles H. Kriebel,et al.  Information Technologies and Business Value: An Analytic and Empirical Investigation , 1995, Inf. Syst. Res..

[2]  Kenneth L. Kraemer,et al.  Information technology and economic performance , 2003, ACM Comput. Surv..

[3]  Anandhi S. Bharadwaj,et al.  A Resource-Based Perspective on Information Technology Capability and Firm Performance: An Empirical Investigation , 2000, MIS Q..

[4]  Giuseppe Labianca,et al.  Information Processing Design Choices, Strategy, and Risk Management Performance , 2006, J. Manag. Inf. Syst..

[5]  B. Loasby.  The External Control of Organizations. A Resource Dependence Perspective , 1979 .

[6]  Aaas News,et al.  Book Reviews , 1893, Buffalo Medical and Surgical Journal.

[7]  Thiagarajan Ravichandran,et al.  Effect of Information Systems Resources and Capabilities on Firm Performance: A Resource-Based Perspective , 2005, J. Manag. Inf. Syst..

[8]  Varun Grover,et al.  Research Report: A Reexamination of IT Investment and the Market Value of the Firm - An Event Study Methodology , 2001, Inf. Syst. Res..

[9]  G. Day.  The Capabilities of Market-Driven Organizations , 1994 .

[10]  Theophanis C. Stratopoulos,et al.  Does successful investment in information technology solve the productivity paradox? , 2000, Inf. Manag..

[11]  Terry Anthony Byrd,et al.  Idea Grou p Inc . Copy right Idea Grou p Inc . Copy right Idea Grou p Inc . Copy right Idea Grou p Inc . Chapter 12 Information Technology , Core Competencies , and Sustained Competitive Advantage , 2019 .

[12]  Jay R. Galbraith.  Organization Design: An Information Processing View , 1974 .

[13]  Nirup M. Menon,et al.  Productivity of Information Systems in the Healthcare Industry , 2000, Inf. Syst. Res..

[14]  Terry Anthony Byrd,et al.  Examining possible antecedents of IT impact on the supply chain and its effect on firm performance , 2003, Inf. Manag..

[15]  J. Barney.  Looking inside for competitive advantage , 1995 .

[16]  N. Venkatraman,et al.  Contingency Perspectives of Organizational Strategy: A Critical Review of the Empirical Research , 1985 .

[17]  Vernon J. Richardson,et al.  Examining the Shareholder Wealth Effects of Announcements of Newly Created CIO Positions , 2001, MIS Q..

[18]  Radhika Santhanam,et al.  Issues in Linking Information Technology Capability to Firm Performance , 2003, MIS Q..

[19]  Heather A. Smith,et al.  The relationship between information technology use and organizational performance , 1993 .

[20]  M. Wade,et al.  Review: the resource-based view and information systems research: review, extension, and suggestions for future research , 2004 .

[21]  Howard E. Aldrich.  Organizations and Environments , 1979 .

[22]  D. Feeny,et al.  Re-designing the IS function around core capabilities , 1998 .

[23]  Yolande E. Chan,et al.  Business Strategic Orientation, Information Systems Strategic Orientation, and Strategic Alignment , 1997, Inf. Syst. Res..

[24]  Mike Chiasson,et al.  Taking Industry Seriously in Information Systems Research , 2005, MIS Q..

[25]  Varun Grover,et al.  Shaping Agility through Digital Options: Reconceptualizing the Role of Information Technology in Contemporary Firms , 2003, MIS Q..

[26]  J. Barney.  Firm Resources and Sustained Competitive Advantage , 1991 .

[27]  R. Grant.  The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation , 1991 .

[28]  Dale Goodhue,et al.  Develop Long-Term Competitiveness through IT Assets , 1996 .

[29]  E. Brynjolfsson,et al.  Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending , 1996 .

[30]  D. J. Wu,et al.  Investment in Enterprise Resource Planning: Business Impact and Productivity Measures , 2002, J. Manag. Inf. Syst..

[31]  M. Porter.  Industry Structure and Competitive Strategy: Keys to Profitability , 1980 .

[32]  Robert W. Zmud,et al.  International Conference on Information Systems ( ICIS ) December 1999 IT Capabilities : Theoretical Perspectives and Empirical Operationalization , 2017 .

[33]  Gautam Ray,et al.  Information Technology and the Performance of the Customer Service Process: A Resource-Based Analysis , 2005, MIS Q..

[34]  John C. Henderson,et al.  Strategic Alignment: Leveraging Information Technology for Transforming Organizations , 1993, IBM Syst. J..

[35]  Ken Peffers,et al.  The Impact of Information Technology Investment Announcements on the Market Value of the Firm , 1993, Inf. Syst. Res..

[36]  Charles C. Snow,et al.  Fit, failure, and the hall of fame : how companies succeed or fail , 1994 .

[37]  P. Schoemaker,et al.  Strategic assets and organizational rent , 1993 .

[38]  J. Barney,et al.  CAPABILITIES, BUSINESS PROCESSES, AND COMPETITIVE ADVANTAGE: CHOOSING THE DEPENDENT VARIABLE IN EMPIRICAL TESTS OF THE RESOURCE-BASED VIEW , 2004 .

[39]  Michael R. Wade,et al.  The Resource-Based View and Information Systems Research: Review, Extension, and Suggestions for Future Research , 2004, MIS Q..

[40]  Richard Makadok.  Toward a synthesis of the resource‐based and dynamic‐capability views of rent creation , 2001 .

[41]  R. Rumelt.  Towards a Strategic Theory of the Firm , 1984 .

[42]  T. C. Powell,et al.  Information technology as competitive advantage: the role of human , 1997 .

[43]  L. Richard Ye,et al.  Information technology and firm performance: Linking with environmental, strategic and managerial contexts , 1999, Inf. Manag..

[44]  Gregory G. Dess,et al.  Dimensions of Organizational Task Environments. , 1984 .

[45]  William L. Fuerst,et al.  Information technology and sustained competitive advantage: a resource-based analysis , 1995 .

[46]  Terry Anthony Byrd,et al.  The leveraging influence of strategic alignment on IT investment: An empirical examination , 2006, Inf. Manag..

[47]  Kenneth L. Kraemer,et al.  Review: Information Technology and Organizational Performance: An Integrative Model of IT Business Value , 2004, MIS Q..

[48]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[49]  A. Adam.  Whatever happened to information systems ethics? Caught between the devil and the deep blue sea , 2004 .