IT Resources, IT-Enabled Capabilities, and Business Performance

IT Resources, IT-Enabled Capabilities, and Business Performance

Morteza Ghobakhloo (Universiti Putra Malaysia, Malaysia), Tang Sai Hong (Universiti Putra Malaysia, Malaysia), and Samrena Jabeen (Arab Open University, Saudi Arabia)
Copyright: © 2015 |Pages: 11
DOI: 10.4018/978-1-4666-5888-2.ch406
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Abstract

A number of IT scholars attempted to analyze the direct contribution of IT to firm performance, but, the findings were mixed and inconclusive. Viewed from IT-enabled organizational capability perspective, recent scholars increasingly consider the firm's IT resources as complementary resources augmenting the value of other organizational resources and capabilities, which will further lead to the performance improvement. This article provides a comprehensive review on the background of IT-enabled organizational capability and provides potential research directions for future IT scholars.
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The Remedy To Productivity Paradox: It-Enabled Capability Perspective

We mentioned that recent IT value researchers believe that the inconsistency in justifying the direct relationship between IT resources controlled by firms and financial or operational performance is attributable to the assumption of the direct relationship between IT and performance (Tang & Ghobakhloo, 2013). Review of prior works in this particular research context recommends that almost all prior studies which drew on IT-enabled capability perspective to explain the business value of IT were successful in linking between IT resources and firm performance. Consistently, Liang et al. (2010) in their meta-analysis demonstrated that the indirect-effect (mediated) model with organizational capabilities can better explain the value of IT than the direct-effect model without organizational capabilities (Figure 1).

Key Terms in this Chapter

Firm (Business) Performance Improvement: The extent of improvement in different measures of financial performance, marketing performance, product/service efficiency performance and process efficiency performance.

Resource Complementarity: The degree to which the joint use of distinct sets of resources produces a higher total return than the sum of returns that could be achieved if each set of resources were utilized independently.

IT Capability: The abilities to leverage different IT resource for intangible benefits.

IT Resources: Any IT-related resources controlled by a firm including physical resources associated with IT such as IT infrastructure, databases, networks and software packages and applications, as well as non-physical (human) resources such as organization-wide IT expertise and IT managers’ skills.

Indirect-Effect Model: RBV-based IT value models that propose an indirect link between IT and firm performance improvement in the presence of the mediating role of IT-enabled capability.

Direct-Effect Model: It value models that propose a direct link between IT and firm performance improvement.

IT-Enabled Higher Order Organizational Capability: Complementing and integrating IT resources with non-IT resources to create new organizational capabilities or enhance existing ones to better deal with environmental changes and management challenges.

Resource-Based View (RBV): A perspective that proposes that competitiveness of a firm depends primarily on the application of a bundle of valuable tangible or intangible resources at the firm's disposal.

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