Board Information Technology Governance Mechanisms and Firm Performance among Iraqi Medium-Sized Enterprises: Do IT Capabilities Matter?

Ibrahim M Menshawy,Raihana Mohdali,Rohaida Basiruddin,Nazahan Qahatan

doi:10.3390/jrfm15020072

Ibrahim M Menshawy, Raihana Mohdali + Show 2 more

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https://doi.org/10.3390/jrfm15020072

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Abstract

This paper aims to investigate the perceptions of Iraqi medium-sized enterprises’ board members on how board information technology governance mechanisms affect their companies’ performance with the help of IT capabilities as a mediator. The study is based on a survey of 223 board members using a stratified random sampling technique. The Structural Equation Model (SEM) method results show that board IT governance structure and board IT governance relational have a significant direct and indirect positive relationship with firm performance through IT capabilities. Contrariwise, IT capabilities do not interfere with the relationship between board IT governance processes mechanisms and firm performance. Our study contributes to the IT business literature by addressing new relationships and providing empirical evidence that explains the inconsistent and mixed results of prior studies. Moreover, it extends and complements these prior studies by considering three board IT governance mechanisms, four IT capabilities, and merges the two dimensions of firm performance in a developing country that offers different institutional settings and litigation environment. The study findings offer notable implications for business practitioners and industry leaders to enhance the IT environment and maximize their corporate outcomes. In addition, these findings draw the attention of the board members, management, and corporate general assemblies to recognize the importance of intensifying the investment in IT capabilities to gain superior firm performance.

Highlights

Information technology (IT) is an essential competitive factor that improves a firm’s business capabilities (Liu et al 2019)
The current study extended these studies by coupling the role of board IT governance mechanisms with IT capabilities (i.e., IT infrastructure, IT integration, IT alignment, and IT management) to examine their effect on firm performance, using 223 Medium-sized enterprises (MSEs) in Iraq represented by their board members
We found that board IT structure and board IT relational mechanisms were associated positively and significantly with firm performance as well as IT capabilities, whereas the board IT process had an insignificant relationship with them

Summary

Introduction

Information technology (IT) is an essential competitive factor that improves a firm’s business capabilities (Liu et al 2019). Companies need to understand the importance of investing in IT and integrating their IT resources with other managerial and organizational aspects (Van Grembergen and De Haes 2009; Lim et al 2012). Firms encounter several challenges in directing their massive investments in the IT segment to enhance their performance and to generate firm value. Firms tend to invest in and govern their IT practices and assets (Chan 2000; Turel et al 2019). Firm performance is the most critical outcome of a firm, as it reflects the extent to which it achieves its goals and gains competitive advantages.

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