Developing Organizational Agility through IT and Supply Chain Capability

Developing Organizational Agility through IT and Supply Chain Capability

Rui Bi (Charles Sturt University, Australia), Robert Davidson (Department of Information Systems, City University of Hong Kong, Kowloon, Hong Kong), Booi Kam (RMIT University, Australia) and Kosmas Smyrnios (RMIT University, Australia)
Copyright: © 2013 |Pages: 18
DOI: 10.4018/jgim.2013100103
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Abstract

Organizations have increasingly invested money in information technology (IT) in order to improve their agility. It is generally believed that organizations with greater IT investment tend to be more agile to response to environmental changes. However, the issue of whether IT is an enabler or impeder of organizational agility still remains unresolved. Drawing upon resource-based view theory and the literatures of information systems and supply chain management, the authors develop and test a theoretical model that integrates IT capability, supply chain capability and organizational agility. The authors propose that IT capability enables the development of a higher level of supply chain capability which is embedded within inter-firm processes and in turn enhances organizational agility. Structural equation modelling is employed to test their theoretical conceptualization of 310 Australian fast-growth small-to-medium enterprises across different industrial sectors. The results show that IT capability does contribute to firm agility through enhancing inter-firm supply chain processes such as integration, information sharing and coordination. This research highlights the role of IT-enabled intermediated processes and the ways in which IT is used by firms to enhance core business processes.
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Introduction

In the current context of intensive competition, globalization and time-to-market pressure, firms are making significant investments in information technology (IT) to develop agility and pursue fast and innovative initiatives so as to respond to environmental challenges. Agile firms are able to deal with rapidly evolving situations, survive unexpected threats and thrive in competitive environments through capitalizing on emerging business opportunities (Lu & Ramamurthy, 2011). Therefore, agility is regarded as an imperative for business success, helping firms to achieve competitive performance in dynamic business environments (Fink and Neumann 2007; Nazir and Pinsonneault 2012; Sambamurthy et al., 2003).

Research that investigates the relationship between IT and organizational agility is increasingly encountered in the information systems (IS) field. Some researchers (e.g., Nazir & Pinsonneault, 2012; Sambamurthy et al., 2003) assert that IT can enhance organizational agility by building digital options, helping firms to speed up decision making, facilitate communication, and respond quickly to changing conditions. Others (e.g., Van Oosterhout et al., 2006; Weill et al., 2002) argue that IT may hinder and even impede organizational agility because of inflexible legacy IT systems and rigid IT architectures. Ironically, a high level of IT investment may result in unintended “technology traps” over time (Grover & Malhotra, 1999, p. 907). In the digital business environment, although the increasing use of IT creates strong electronic linkages in supply chains, it may also have unintended adverse effects on supply chain flexibility and so may severely constrain supply chain performance (Gosain et al., 2004). For example, studies show that the integrated enterprise systems used to automate and support business processes have positive impacts on both business agility (Goodhue et al., 2009) and rigidity (Rettig, 2007). These mixed observations indicate that IT can be either an enabler or an impeder of organizational agility.

The use of IT in the supply chain context has also gained intensive attention in the IS area. While supply chains involve “the flows of material, information and finance among customers, suppliers, manufactures, and distributors” (Lee, 2000, p. 31), supply chain management is regarded as a digitally enabled inter-firm process capability (Rai et al., 2006). As IT provides new opportunities for firms to manage supply chain relationships, it is imperative that we understand how IT resources and capabilities relate to inter-firm business processes (Dong et al., 2009). Although research has examined the performance benefits of IT resources/capability (Bhatt & Grover, 2005; Stoel & Muhanna, 2009), there is still limited understanding of the links between IT capability and agility in the supply chain context (Kohli & Grover, 2008). Moreover, current literature on IT business value has largely overlooked agility as a potential outcome, instead focusing on standard firm performance metrics (Nazir & Pinsonneault, 2012). Thus, further rigorous empirical examination is needed to understand how and why IT capability shapes firm agility through intermediate processes.

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