Board Information Technology Governance and Business Agility: An Empirical Analysis Among Bosnian Enterprises

Board Information Technology Governance and Business Agility: An Empirical Analysis Among Bosnian Enterprises

Admir Kozlica
Copyright: © 2021 |Pages: 22
DOI: 10.4018/IJESMA.2021070102
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Abstract

The goal of this paper is to empirically investigate and analyze the board's involvement in the information technology governance (ITG) function and how the ITG degree has implications for enterprise agility and financial performance. The analysis primarily relies on perceptual metrics. That is board members' views on the importance and impact of the decisions considered and made on the business outcome. The contribution is reflected in the relation of several of the most significant enterprise resources in complex conditions. The approach seeks to determine whether enterprise agility and business performance are the result of a higher degree of ITG or are critical elements of contingency. The test results show that enterprise agility has a significant indirect impact between ITG attainment and performance and that predefined IT role factors drive this relationship. The limitation of the research is that the capital market is not sufficiently developed in Bosnia and Herzegovina, and the responsibilities of the IT supervisory and audit bodies are not fully formulated.
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Introduction

For some businesses, IT can be of strategic importance, while for others, it is a rational use of resources and usually has an operational role. On the other hand, operability can, of course, improve strategic planning, but it certainly does not play a key role in defining a business strategy. Businesses of this type cannot expect senior management to focus on strategic planning in the same way as first-type enterprises.

The results of a study conducted by McFarlan and McKenney in the early 1980s (McFarlan et al., 1983) and a revised study (Nolan & McFarlan, 2005) show that the impact of IT on strategy varies widely from company to company and that these variations can be considered in the industry in which they are used. Many factors, such as size, the complexity of the product line, and alignment with the strategic plan, help determine the best way to integrate the IT strategy with the company strategy. The study by McFarlan and McKenney (McFarlan et al., 1983) advocates the concept of strategic planning, which is still valid today as the basis on which the model of the strategic role of IT in the company is based. The principles of the conceptual model are presented in four-field matrices, where each field identifies one of the roles of IT by relevance to the enterprise.

Recent research also points to the importance of the hierarchical position of the CIO in aligning business strategy and IT. Conducted longitudinal case studies have shown that the more CIOs are involved in strategic business planning processes, the better and more value-added to the business and thus the operational results (Vugec et al., 2017). The problems of adopting IT Governance (reasons, mechanisms, dynamics) in four financial institutions where the COBIT framework has been applied for a long time (five years) are analyzed longitudinally. COBIT is an internationally accepted framework that sets out guidelines that describe what the board needs to do and provides a comprehensive business view of IT enterprises. The developed qualitative case study methodology is applied in the analysis. The results indicate an increase in COBIT compliance across all enterprises over five years, but with significant differences in the rate and rate of adoption. The research points to the importance of the right strategic IT and business alignment to increase the degree of IT management and opportunities for business model innovation. The research also indicates that there is no “perfect” formula for implementing IT governance or a “one-for-all” model. There is faster progress in adopting IT governance, that is, clear progress in its development (from Supporter to Strategic IT, which enables innovation throughout the business model). Also, regulatory guidance (at the national - industrial or subsidiary level) is in many cases useful for launching an IT governance initiative, while specific and subtle mechanisms for adopting it make a difference in its development.

Viewed from a business performance perspective, the innovative nature of IT creates added value to the business compared to the traditional or standard approach imposed by national IT governance regulations. Enterprises and subsidiaries with domestic ownership structure differ in their motivation to improve IT governance (Vugec et al., 2017). Strong executive management commitment and support are one of the critical enablers for the changed role of IT (Vugec et al., 2019).

From the perspective research problems, due to the specificity of IT for the environment in which the enterprise operates and industries, the problem of determining the strategic importance of IT for the enterprise may arise. An example would be enterprises where operating efficiency is a priority and of strategic importance to the business. In this case, IT is in the operational role, and the enterprise strategy is directed towards the optimization of operational risks. Businesses of this type do not have an affirmation of innovation and competitive advantage based on technological innovation.

The aim is that the consideration of the “use of IT” is essential. Two contingent factors and four resulting modes are operational importance (Factory Mode); strategic importance (Strategic Mode); business support (Support Mode); the transition from one to the other (Turnaround mode); as well as 14 indicators to determine the classification of the organization (Nolan & McFarlan, 2005). This concept, known in the literature as the Strategic Grid, serves us to classify companies according to the strategic and operational importance of IT for the company.

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