Aligning the IT portfolio with business strategy: Evidence for complementarity of corporate and business unit alignment

Abstract

Research on alignment between business strategy and information technology (IT) strategy has generated extensive insights over the last three decades. That research has focused primarily on the fit between business and IT strategies, while cross-domain alignment, i.e., alignment between business strategy and IT infrastructure components, has received far less attention. Further, previous studies have focused on the implications of alignment for firm performance while the effects of cross-domain alignment on business unit performance in multi-business organizations (MBOs) are yet to be examined. This issue is important as IT infrastructures are evolving rapidly. Specifically, MBOs are increasingly turning to corporate IT platforms to support a common set of shared IT needs, while still allowing individual business units to manage unique aspects of their own IT needs through local IT applications. Extending prior research, this study proposes that performance of business units in MBOs is influenced by two complementary forms of cross-domain alignment, viz., alignment between the corporate IT platform and the corporate business strategy, and alignment between the business unit’s portfolio of IT applications and its business strategy. Using data from a global survey of 120 organizations, we find evidence that complementarity between these two forms of cross-domain alignment creates a joint positive effect on business unit performance. We also find that this effect varies with the extent of process digitization within business units. Implications for theory and practice are discussed.