Investigating the Relationship between Strategic Alignment and Information Technology Business Value: The Discovery of a Paradox

Abstract

Although business executives remain skeptical about the extent of payoffs from investment in information technology (IT), strategic alignment or the alignment of information systems strategy with business strategy continues to be ranked as one of the most important issues facing corporations. In this paper, we report on the results of a process-level study to investigate the relationship between strategic alignment and IT payoffs. An analysis of survey data from 63 firms finds a positive and significant relationship between strategic alignment and IT payoffs, a relationship that holds for all firms, irrespective of their strategic intent or goals for IT. However, in exploring minor differences in strategic alignment between firms with different goals for IT, we uncovered evidence of an alignment paradox. This paradox shows that while strategic alignment can lead to increased payoffs from IT, this relationship is only valid up to a certain point beyond which, paradoxically, further increases in strategic alignment appear to lead to lower IT payoffs. Finally, we offer some suggestions for why this paradox might exist, specifically around issues of environmental uncertainty, industry clock-speed, and the need for organizational flexibility