Building IT Capability to Increase Organizational Performance: A Path-Oriented Process

Rui Bi, Booi Hon Kam, Kosmas X. Smyrnios

Abstract


Most studies on information technology (IT) capability have drawn their conceptualization from the tenets of resource-based view (RBV). Though path dependence is central to the concept of RBV, very few studies have examined the developmental paths of IT capabilities, which are typ-ically treated as first-order constructs with their effects on firm performance investigated as di-rect causal links. This paper conceptualizes IT capability as the outcome of a path- specific re-source building process, driven by the e-business skills and knowledge of a firm’s IT human re-sources, which we refer to as e-business centric IT expertise. We posit that through the use of appropriate IT infrastructure, and the development of back-end integration and front-end func-tionalities, e-business centric IT expertise could be harnessed to provide the right information to the right customers at the right time, giving rise to a firm-specific IT capability. We further con-tend that IT capability is a source of competitive advantage, offering inimitable differentiation in market responsive agility, which is a key to securing sales in an increasingly customer-centric market. We operationalize these conceptualizations as a structural equation model (SEM) and tested 12 hypothesized relationships using data drawn from a survey of 310 fast-growth small-to-medium sized companies in Australia. The test results uphold 10 of the 12 formulated hy-potheses, supporting our conceptualization that IT capability building is a path-specific process. To affirm our contention that IT capability is developed from the interacting effects of a suite of IT resources, and not the sum of the disjointed effects of individual resources, we also formulated and tested an alternative model that links individual IT resources directly to market responsive agility. Combined with a series of mediation tests, our SEM exercises confirm that IT resources interact in a specific way to give rise to IT capability to enhance market responsive agility and achieve sales performance. We discuss the implications of these findings in the context of IT investment.

Keywords


IT capability; E-business centric it expertise; Market responsive agility; Sales performance; Path-specific process

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Bi, R., Kam, B. H., Smyrnios, K. X. (2011). " Building IT Capability to Increase Organizational Performance: A Path-Oriented Process "Pacific Asia Journal of the Association for Information Systems, 3(3), pp.29-56.