The Role of IT and Organizational Capabilities on Digital Business Value

The opportunities and threats that digital technologies like SMACIT (Social, Mobile, Analytics, Cloud and Internet of Things) bring to organizations are increasingly being explored by the academia and industry. Organizations face the challenge not only to use new technologies but to gain competitive advantage from such embracement in order to stay relevant in the market. This study aims to provide practical insights on how Small and Medium Enterprises (SMEs) can prepare to embrace Digital Technologies. For this, it proposes that a combination of both IT and Organizational capabilities can be the foundation for achieving Business Value with Digital Technologies or “Digital Business Value”. IT capabilities are evaluated by the IT capability maturity framework (IT-CMF) and Organizational Intelligence Quotient (Mendelson and Pillai, 1999) is used to evaluate organizational capabilities. Digital Business Value is defined as the achievement of business objectives using Digital Technologies (Riera & Iijima, 2017). The target population was one hundred Japanese SMEs which were awarded by The Ministry of Economy, Trade and Industry due to their effective utilization of IT supporting business performance in the list of “Competitive IT Strategy SME Selection 100” over the years 2015, 2016 and 2017. Data collection was done with questionnaires sent to all the awarded organizations and collected 34 responses. A quantitative approach was used and the data analysis was done with correlation and regression analysis. Empirical evidence demonstrated that IT and Organizational capabilities are linked to Digital Business Value. A subset of IT capabilities like Risk Management, Business Planning among others was indeed related to Digital Business Value. In addition, Internal Knowledge Dissemination and Continuous Innovation dimensions from Organizational IQ showed relationship with Digital Business Value. This study unveiled that the combination of IT and Organizational capabilities leverage the value from Digital technologies. The outcomes from this study may be of reference to SMEs that look to embrace Digital Technologies as it shows which particular capabilities may be of interest for developing. This study extends the Digital Transformation literature in particular how dynamic capabilities work together in order to enable Digital Business Value

[1]  D. Teece,et al.  DYNAMIC CAPABILITIES AND STRATEGIC MANAGEMENT , 1997 .

[2]  Jeanne W. Ross,et al.  Designing and Executing Digital Strategies , 2016, ICIS.

[3]  Sabyasachi Mitra,et al.  Analyzing Cost-Effectiveness of Organizations: The Impact of Information Technology Spending , 1996, J. Manag. Inf. Syst..

[4]  O. A. Sawy,et al.  Digital business strategy: toward a next generation of insights , 2013 .

[5]  R. Dorf,et al.  The Balanced Scorecard: Translating Strategy Into Action , 1997, Proceedings of the IEEE.

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

[7]  Martin Curley,et al.  The IT Capability Maturity Framework:A Theory for Continuously Improving the Value Delivered from IT Capability. , 2008 .

[8]  H. Mendelson.  Organizational Architecture and Success in the Information Technology Industry , 2000 .

[9]  Dr. Marian Carcary,et al.  The Adoption of Cloud Computing by Irish SMEs – an Exploratory Study , 2014 .

[10]  Masaaki Hirano,et al.  Does IT Augment organisational Capabilities (or Vice versa)? -Implications from Japanese Dat , 2016, PACIS.

[11]  Marian Carcary,et al.  Driving SME Competitiveness ina Dynamic Business Landscape–Leveraging an IT Capability Mindset , 2014 .

[12]  Markus Helfert,et al.  The IT-CMF: A Practical Application of Design Science , 2010, DESRIST.

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

[14]  WeillPeter,et al.  IT Assets, Organizational Capabilities, and Firm Performance , 2007 .

[15]  Piet Kommers,et al.  Guest Editors' Introduction-Special Issue on Digital Society and E-Technologies , 2013, Pac. Asia J. Assoc. Inf. Syst..

[16]  Junichi Iijima,et al.  How Do Japanese SMEs Generate Digital Business Value from SMACIT Technologies with Knowledge Creation? , 2017, IC3K.

[17]  Eileen Doherty,et al.  Enhancing IT Capability Maturity –Development of an SME Frameworkto Maximize the Value Gained from IT , 2013 .

[18]  Junichi Iijima,et al.  Does Investment in Digital Technologies Yield Digital Business Value? The Digital Investment Paradox and Knowledge Creation as Enabling Capability , 2018, KMIS.

[19]  Sebastian Beutel.  The Relationship Between Digital Orientation and Firm Performance , 2018, ICIS.

[20]  Sinan Aral,et al.  I.T. Assets, Organizational Capabilities and Firm Performance: Do Resource Allocations and Organizational Differences Explain Performance Variation? , 2007 .

[21]  Nripendra P. Rana,et al.  Developing a Framework using Interpretive Structural Modeling for the Challenges of Digital Financial Services in India , 2018, PACIS.

[22]  Xiaolin Zhu,et al.  How do IT capabilities support fast delivery of big data services to clients across industries? , 2018, PACIS.

[23]  Jeanne W. Ross,et al.  How Big Old Companies Navigate Digital Transformation , 2020, MIS Q. Executive.

[24]  Narayan Ramasubbu,et al.  How Information Management Capability Influences Firm Performance , 2011, MIS Q..

[25]  J. Iijima,et al.  A Study of the Effect of Organizational IQ on IT Investment and Productivity , 2007, 2007 International Conference on Wireless Communications, Networking and Mobile Computing.

[26]  Kai Wang,et al.  Investigating the Impact of IT Ambidexterity on Digital Innovation Capability , 2017, PACIS.

[27]  Mohan Tanniru,et al.  Hospital Leadership in Support of Digital Transformation , 2018, Pac. Asia J. Assoc. Inf. Syst..

[28]  Constance E. Helfat,et al.  The dynamic resource-based view: capability lifecycles , 2003 .

[29]  竹内 弘高,et al.  Japan, moving toward a more advanced knowledge economy , 2006 .

[30]  Ravindran R. Pillai,et al.  Information Age organizations, dynamics and performance , 1999 .

[31]  中小企業庁.  Small business in Japan : white paper on small and medium enterprises in Japan , 1976 .

[32]  Haim Mendelson,et al.  Survival of the Smartest: Managing Information for Rapid Action and World-Class Performance , 1999 .

[33]  Rolf Alexander Teubner,et al.  How Management Consultancies Make Sense of Digital Strategy , 2018, ICIS.

[34]  R. Grant.  Chapter 8 – Prospering in Dynamically-Competitive Environments: Organizational Capability as Knowledge Integration , 1999 .

[35]  Lorin M. Hitt,et al.  Beyond the productivity paradox , 1998, CACM.

[36]  John Campbell,et al.  PAJAIS special issue on Social Media and Social Commerce , 2017, Pac. Asia J. Assoc. Inf. Syst..

[37]  Junichi Iijima,et al.  Linking Knowledge Creating Capabilities, IT Business Value and Digital Business Value: An Exploratory Study in Japanese SMEs , 2017, KMIS.

[38]  Robert Lorenz Törmer.  The Architectural Enablement of a Digital Platform Strategy , 2018, PACIS.