On the Assessment of the Strategic Value of Information Technologies: Conceptual and Analytical Approaches

Abstract

This study compares two conceptual (resource-centered and contingency-based) and two analytical (linear and nonlinear) approaches that can be used to assess the strategic value of information technology. Two hypotheses related to these approaches are developed and tested based on matched survey data collected from the CEOs and CIOs of 110 firms. The results indicate that the resource-centered and contingencybased approaches provide complementary understanding of 1 Ritu Agarwal was the accepting senior editor for this paper. Christina Soh was the associate editor. Yolande E. Chan and Vijay Sethi served as reviewers. The third reviewer chose to remain anonymous. the strategic value of IT. On the one hand, the contingencybased approach is better at explaining the impact of costrelated IT applications on firm performance. Alignment between business strategy and information systems strategy on cost reduction was found to have a significant negative association with firm expense. On the other hand, the resource-centered perspective has a stronger predictive ability of IT impact on firm revenue and profitability. Our results indicate that investments in growth-oriented applications were directly and positively related to firm revenue. An ANOVA test indicates that the nonlinear approaches provide additional insights that help to better understand the relationship between alignment and performance. The response surface method (RSM) shows that high-end strategic alignment (i.e., fit occurring when business strategy and IT strategy are both high) leads to superior performance compared to lowend strategic alignment (i.e., fit occurring when business strategy and IT strategy are both low). We discuss the implications of this study for research and practice and conclude with suggestions for future research directions.

Information technology and open innovation: A strategic alignment perspective

“…The effects of alignment has been empirically examined by previous studies M a n u s c r i p t 8 which found that alignment affects performance in general (Chan et al 1997;Choe 2007;Geissler et al 2001;Kearns and Lederer 2004;Oh and Pinsonneault 2007), and in critical areas such as sales growth and innovation (Chan et al 1997;Croteau and Bergeron 2001).…”

Hybrid strategy and firm performance: The moderating role of individual and technological ambidexterity

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Healthcare service innovation based on information technology : The role of social values alignment

“…To be more specific, business-IT alignment refers to "the degree to which the mission, objectives, and plans contained in the business strategy are shared and supported by the Information Technology (IT) strategy" (Reich & Benbasat, 1996, p. 56). The alignment framework inspired several empirical studies with findings that indicate that well-aligned organizations see their performance increases (Chan et al, 1997;Croteau & Bergeron, 2001;Sabherwal & Chan, 2001;Bergeron et al, 2004;Oh & Pinsonneault, 2007;Yayla & Hu, 2012;Gerow et al, 2014;Coltman et al, 2015). Research on business-IT alignment distinguishes between alignment in terms of intended strategic plans (e.g.…”