IT business value represents important outcomes in firms (Banker & Kauffman, 2004; Gable, Darshana, & Chan, 2003; Ravichandran & Chalermsak Lertwongsatien, 2005) whereas information systems (IS) integration represents a relevant amount of the IT spending. Notwithstanding, while most firms are making major investments in information technology, particularly in information systems integration (e.g., ERP and data warehouse solutions), not all of them apply IT effectively in their business activities (Brynjolfsson, McAfee, Zhu, & Sorell, 2006; Dehning & Stratopoulos, 2003; Jason, Vijay, & Kenneth, 2003) obtaining IT business value and organizational competitive advantage. This research is based on an integrative model of IT business value, aiming to evaluate the mediating effect of an “IT organizational assimilation capacity” between IS integration and organization competitive advantage. Taking into account the theoretical premises that IT business value is generated by the exploitation of both IT and organizational resources, we develop a research model and propose two research hypotheses. The model and the related hypotheses are based on a large-scale sample survey (Francalanci & Morabito, 2006). The responses were obtained from 466 CIOs and senior business executives, who were members of the firms’ top management teams in Italian companies.
The term IT business value is commonly used to refer to the organizational performance impacts of IT resources at both the intermediate process level and the organization-wide level, comprising both efficiency and competitive impacts (Melville & Kraemer, 2004). In fact, IT resources generate business value when they are “assimilated” as a routinized element of firms’ value-chain activities and business strategies (Aral, Brynjolfsson, & Wu, 2006).
Researchers have employed several theoretical paradigms in examining the organizational performance impacts of IT, including microeconomics (Brynjolfsson & Hitt, 2003; Tanriverdi, 2005; Wade & Hulland, 2004), industrial organization theory (Belleflamme, 2001; Mahnke, Overby, & Vang, 2005), sociology and socio-political paradigms (Chatfield & Yetton, 2000; Devaraj & Kohli, 2003; Hatami, Galliers, & Huang, 2003) and, finally, strategic perspective (Bharadwaj, 2000; Caldeira & Ward, 2003).
Analyzing this stream of studies by focusing on the “focal firm”, we can summarize that if the right IT is applied and assimilated within the right business process, the IT application improves processes and organizational performance/competitiveness, conditional upon appropriate investments in complementary organizational resources. In particular, the competitive environment, including industry characteristics and trading partners, as well as the macro environment are relevant to IT business value generation (Melville et al., 2004). Our research is focused at firm level, where IT business value is generated by the deployment of IT resources (including both technology IT resources and human IT resources) through a process that involves the deployment of complementary organizational resources within business processes. Referring to technological IT resources, there are studies that aggregate diverse technological IT resources into a single measure, and studies that examine specific information systems and types of IT.
Key Terms in this Chapter
Business Process: A business process is the specific ordering of work activities across time and space, with a beginning, an end, and clearly identified inputs and outputs ( Davenport, 1993 ).
IS Integration: IS integration is defined as the outcome of initiatives leading to greater technical standardization and broader user access to a common set of technical resources, infrastructure, data, or software applications ( Hasselbring, 2000 ; Jhingran, Mattos, & Pirahesh, 2002 ).
Organizational Performance: Organizational performance denotes IT-enabled overall firm performance, including productivity, efficiency, profitability, market value, and competitive advantage (Melville et al., 2004 AU29: The in-text citation "Melville et al., 2004" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ).
IT Business Value: IT business value is the organizational performance impacts of information technology at both the intermediate process level and the organization wide level, and comprising both efficiency impacts and competitive impacts (Melville et al., 2004 AU28: The in-text citation "Melville et al., 2004" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ).
Absorptive capacity: Absorptive capacity is defined as the firm’s ability to identify, assimilate, and exploit external knowledge to commercial ends ( Cohen & Levinthal, 1990 ); upon a resource-based view perspective, absorptive capacity represents the ability of a company to translate a change in a combination of input resources into organizational performance ( Malhotra et al., 2005 ; Zahra et al., 2002 AU27: The in-text citation "Zahra et al., 2002" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ).
Technological IT Resource (TIR): TIR can include both hardware and software, and can be categorized into IT infrastructure, and business applications using the infrastructure (Melville et al., 2004 AU30: The in-text citation "Melville et al., 2004" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. )