Understanding the Link Between Information Technology Capability and Organizational Agility: An Empirical Examination

Abstract

Information technology is generally considered an enabler of a firm's agility. A typical premise is that greater IT investment enables a firm to be more agile. However, it is not uncommon that IT can also hinder and sometimes even impede organizational agility. We propose and theorize this frequently observed but understudied IT-agility contradiction by which IT may enable or impede agility. We develop the premise that organizations need to develop superior firm-wide IT capability to successfully manage their IT resources to realize agility. We refine the conceptualization and measurement of IT capability as a latent construct reflected in its three dimensions: IT infrastructure capability, IT business spanning capability, and IT proactive stance. We also conceptualize two types of organizational agility: market capitalizing agility and operational adjustment agility. We then conduct a matched-pair field survey of business and information systems executives in 128 organizations to empirically examine the link between a firm's IT capability and agility. Business executives responded to measurement scales of the two types of agility and organizational context variables, and IS executives responded to measurement scales of IT capabilities and IS context variables. The results show a significant positive relationship between IT capability and the two types of organizational agility. We also find a significant positive joint effect of IT capability and IT spending on operational adjustment agility but not on market capitalizing agility. The findings suggest a possible resolution to the contradictory effect of IT on agility: while more IT spending does not lead to greater agility, spending it in such a way as to enhance and foster IT capabilities does. Our study provides initial empirical evidence to better understand essential IT capabilities and their relationship with organizational agility. Our findings provide a number of useful implications for research and managerial practices.

The Contingency Effect of Relational Competency on the Relationship between Information Technology Competency and Firm Performance

“…Less is known about how the IT can help detect the windows of opportunity with proactive stance to gain competitive advantage such as improvisational capabilities, especially in the highly turbulent environment (Lu et al 2011;Pavlou et al 2010). As such, we draw from the study by Sambamurthy et al (2003) and further unpack the underlying casual mechanisms through which IT competency influences firm performance.…”

“…It is also indicated that capability-building process is more significant than the resource-picking process (Oh et al 2012). Third, the logic of opportunity emphasizes superior firm performance in terms of relentless innovation and exploitation of existing resources and capabilities to create business opportunities (Lu et al 2011;Sambamurthy et al 2003). This logic assumes that the firm should be opportunity oriented and has the strategic knowledge and insight to detect and seize the windows of opportunity that emerge in the fast-paced business environments (Lu et al 2011;Tippins et al 2003).…”

“…As such, IT knowledge of a firm helps better search for new ways to explore and exploit the IT infrastructure to create and capitalize on the business opportunities (Lu et al 2011). In particular, with a high understanding of the strategic potential of IT, the firm would develop appropriate strategies to facilitate the creation of a clear vision for IT, and ensure the strategic use of IT (Bassellier et al 2001).…”

“…To this end, we conceptualize IT competency in terms of IT objects, IT operations, and IT knowledge based on the basic tenets of the RBV (Barney 1991;Bhatt et al 2005) and the existing IS literature (Lu et al 2011;Tippins et al 2003). Drawing upon the RBV and RV, we examine the extent to which the three types of IT competencies affect firm performance and how they are influenced by IOC.…”

“…Deploying information technology (IT) in the firm's interorganizational processes to derive competitive advantage has generated much excitement among information systems (IS) researchers and practitioners (Liu et al 2013; Lu et al 2011;Roberts et al 2012; Tippins et al 2003). IT competency enables the firm to establish a requisite set of technological resources, providing the foundation for diffusing IT applications along the supply chain (Tu 2010).…”