A Dynamic Capabilities Approach to Understanding the Impact of IT-Enabled Businesses Processes and IT-Business Alignment on the Strategic and Operational Performance of the Firm

Abstract

For the past two decades, researchers have sought to understand how IT investment leads to organizational success. However, this has proven to be an elusive goal. We posit that a new perspective is needed to better understand IT investment. We must examine how the investment is enacted and reflected within the firm. We will argue that investment is enacted within the technology resources and corresponding business processes and reflected in the IT-business alignment. Based on the literature within Dynamics Capabilities Theory and IT-Business Alignment, we will propose a theoretical model that seeks to understand the impact of IT-enabled business processes and IT-business alignment on the strategic and operational success of a firm and whether the impacts experience a lag effect. Using data from fifty-eight European firms over a two-year period, we will build a structural equation model to test our theoretical model. The results indicate that alignment is important for strategic and operational success in year 1 but not in year 2. Furthermore, of the two, alignment has a stronger impact on strategic than operational success. In contrast, business process performance has an impact on organizational performance in year 1 and year 2. For both years, the impact on operational success is stronger than the strategic one. We also notice that the impact of business process performance on operational success decreases between year 1 and year 2, whereas the impact on strategic success is stronger in year 2 than in year 1.