Value Chain Linkages and the Spillover Effects of Strategic Information Technology Alignment: A Process-Level View

Abstract

The alignment of information technology (IT) and business strategy is a perennial challenge for corporate executives. While earlier studies confirm the value of alignment, there is still some question as to how alignment creates value and the level at which value is created. In this research, we use a series of theoretical arguments based on the interconnected structure of the value chain to consider the extended effects of alignment at the process level. Since processes are often linked to create a complex chain of activities, the absence or presence of alignment in any process could have implications for business performance elsewhere in the value chain. Minimally aligned processes can not only disrupt performance within the focal process, but their effects may also be felt further downstream in the form of bottlenecks and a diminution in the business value of IT. Using a simplified form of the value chain and data from matched surveys of business and IT executives at 317 U.S. and EU firms, we examine how the effects of alignment on a given process spill over into processes further downstream, creating higher IT business value in those downstream processes. We also show that these spillover effects continue along the length of the value chain and do not diminish based on distance from the focal process. Our results reinforce the call for firms to improve the fit between business and IT strategy by showing how efforts to improve alignment in a given process can deliver a stream of benefits along the value chain. This research provides a fresh perspective on the value of alignment, facilitating a deeper understanding and appreciation of the link between strategic IT alignment and firm performance.