Antecedents and Outcomes of IT-Business Strategic Alignment: An Empirical Study of Jordanian Public Shareholding Firms

Abstract

While researchers have encouraged more research on the causal chains between IT investments and firm performance, the results of empirical studies have been inconclusive. This is partly due to the exclusion of IT-business strategic alignment (known as strategic alignment). In particular, scholars have continuously called for research that addresses the antecedent factors that lead to the alignment. Moreover, the elusive link between strategic alignment and firm performance calls for further research into intermediate variables, which would in turn affect company performance. Furthermore, although there is significant literature on strategic alignment and its consequences, little progress has been made in developing a comprehensive theoretical understanding of how organizations can leverage strategic alignment types to positively influence firm performance.Therefore, this study has succeeded in developing a causal model illustrating the relationships between strategic alignment antecedents, strategic alignment, and firm performance through vital intermediary variables, namely explicit and tacit knowledge management (KM) strategies. Specifically, this study has examined the impact of IT-business strategic alignment antecedents in terms of interaction between business and IT managers, association between business and IT plans in terms of IS plans-reflect-business plans (ISP-BP) and business plans-reflect-IS plans (BP-ISP), shared knowledge between business and IT managers, and environmental uncertainty in terms of dynamism and heterogeneity; on ITbusiness strategic alignment in terms of managers’ exploitation and exploration activities; and finally the impact of IT-business strategic alignment on explicit and tacit KM strategies; and in turn on firm performance in terms of growth (i.e. accounting-based) and innovation (i.e. market-based) performances. Furthermore, in order to explore the above research relationships, the study utilizes the positivism paradigm while applying mixed-method techniques that acquired quantitative and qualitative data, in which such triangulation would help provided more insight into the issues studied in this research. Particularly, this study has tested the research model by conducting 152 survey questionnaires with public shareholding firms in Jordan. It examines the model by using dynamic panel data for the period 2000-2006 for the 152 Jordanian firms. This is by employing the generalised method of moment (GMM) technique, which supplies a set of results that is robust to the endogeneity of all explanatory variables, and to the presence of unobservable heterogeneity. After that, the study conducted several follow-up interviews in Jordan to further validate the research results. Therefore, the results obtained from the structural equation modelling (SEM) technique, generalised method of moment system, and supplementary interviews offer a valuable insight into the research questions. However, even though this study is the first research of its kind to incorporate different aspects of alignment antecedents, strategic alignment, explicit and tacit knowledge management strategies, and firm performance into an assessment instrument based on a model using structural equation modelling (SEM) and dynamic panel generalised method of moment (GMM) techniques, and several accompanying interviews to support interpreting the quantitative results, some limitations and directions for further research are discussed. Furthermore, since some of the research propositions were supported and some were not, and although this study has provided a detailed roadmap which researchers and practitioners can use to understand the resources required, realizing the potential values of their IT investments, future research is clearly needed to reveal better insights into the nature of these associations.