The Effects of Aligning IT with Business Strategy in Small-to-Medium Enterprise Growth

Transcription

1 The Effects of Aligning IT with Business Strategy in Small-to-Medium Enterprise Growth Rui Bi School of Management & Marketing Charles Sturt University, Australia 1

2 Background IT business value has become a thematic line of inquiry. SMEs are driving engines of most economies (OECD 2013). SME success is associated with entrepreneurial firm attributes, behaviors, and strategies (Barringer et al. 2005, p.682). Understanding the determinants and behaviors of SME success is still limited and fragmented. 2

3 Theoretical Foundation Resource-Based View (RBV) Theory Posits that firms create value by treating resources/capabilities as central consideration (Barney 1991) Firms need to employ IT resources that are unique and not simultaneously implemented by competitors in order to create and sustain long-term competitor advantage (Mata et al. 1995) The RBV theory provides a lens to explain an indirect role of IT alignment in business value creation through the improvements of intermediate business process ( Sambamurthy et al. 2003) IT Alignment (IT Resource) Inter-mediating Business Processes (Competitive Processes) Firm Performance 3

4 Research Model Competitive Processes Strategic Collaboration H5 Control Variables: Firm Size, Firm Age, Industry IT Resource IT Alignment H1 H3 H4 Responsiveness H7 SME Performance H2 H6 Coordination 4

5 Literature Review (1/6) IT Alignment IT alignment refers to the degree to which IT priorities, goals, and objectives are aligned with business strategies (Chan et al., 1997; Sabherwal & Chan, 2001). The potential for a firm to use IT to achieve competitive position highlights the importance of effective IT planning. IT alignment not only facilitates acquisition and deployment of IT to meet a firm s competitive needs and strategic objectives, but also enables companies to effectively capitalize on IT investments to achieve business value (Rai & Tang 2011, Zhang et al. 2008) The success of IT use is strongly related to aligning IT strategy with business objectives, which is regarded as a crucial determinant of SME business success (Zhang et al. 2008) High growth SMEs gain real benefit and value from IT because they employ strategic IT planning for their future (Lu & Ramamurthy 2011) 5

6 Literature Review (2/6) IT Alignment and Strategic Collaboration IT alignment provides a basis for SMEs to develop strategic collaboration - employs IT strategically to enhance collaboration with their business partners and foster relational capability (Levy et al. 2003, Raymond & Bergeron 2008). - makes inclusive decisions which are fully supportive of collaboration across firms (Kraatz & Zajac 2001). - fosters mutual respect and trust relationships, thus facilitating collaboration (Cheng 2011, Terjesen et al. 2011) 6

7 Literature Review (3/6) IT Alignment and Coordination IT alignment enables SMEs to leverage integrated IT systems for coordination activities (Setia and Patel 2013) - increases coordination through leveraging IT in processes, practices, and strategic initiatives (Rosenzweig 2009). - enables firms to embed IT tightly with inter-firm coordination business processes (Tallon 2011) such as facilitating manufacturing (Oh & Pinsonneault 2007), delivery (DeGroote & Marx 2013), and new product development (Cheng et al. 2014). - leverages integrated IT systems in fostering strategic coordination to reconfigure operational plans and implement strategic initiatives (Cragg et al. 2011). 7

8 Literature Review (4/6) IT Alignment and Responsiveness IT alignment is essential for an effecive response to dynamic markets - promotes knowledge and resource sharing (Dong et al., 2010). - makes informal and improvised decisions - fosters business processes to be responsive and flexible - facilitates joint translation of market knowledge into strategies (Raymond & Bergeron 2008). 8

9 Literature Review (5/6) Collaborative strategic relationships are important: align interests with each other, cultivate trust and commitment, and promote learning and knowledge development. understand and enact their roles. focus on achieving long-term common goals exchange knowledge and resources, make strategic decisions, and increase responsiveness 9

10 Literature Review (6/6) Responsiveness and SME performance Responsiveness reflects a firm s ability to collaborate with its business partners in order to build complementary resources, develop jointly managing, respond to market changes To respond to new market opportunities To achieve business benefits such as - increased revenues (Perols, Zimmermann, & Kortmann, 2013) - profitability (Dong et al., 2009; Rai & Tang, 2010). - cost deduction (Liu et al. 2013) - new product development - improved customer service 10

11 Cross-sectional Survey Research Method - Participants: CEOs/founders from1,335 Australian fast growth SMEs Final usable data: 310, response rate: 28% Profile of Responding Firms Others 30% IT 19.7% PhD or Doctorate Property & 1.6% business service Year % 14.5% Other 12.9% Bachelor 55.2% Construction 6.8% Communications 7.4% Finance & Insurance 8.4% Personal & other service 9% MBA 15.8% Industry Sector CEO/Founder s Education Level 11

12 Results Competitive Processes H1(.36***) Strategic Collaboration SMC=21% H4(.28***) H5(.15*) IT Resource IT Alignment H3(.31***) Responsiveness SMC=51% H1(.81***) SME Performance SMC=65% H2(.45***) H6(.43***) Coordination SMC=37% *p<.05, **p<.01, ***p<

13 Contributions to Research Utilize RBV theory to explain the inter-relationships between IT alignment, strategic collaboration, coordination, responsiveness, and firm performance. Advancement in investigating the effect of IT alignment at the business process level, and thus provide a new insight to understand the effect mechanism of IT alignment on firm performance. Growth-oriented SMEs employ IT alignment as a strategic tool, effectively aligns IT resources with strategic purposes to achieve outstanding IT-based competitive advantage. 13

14 Implications to Practices Managers should be aware that the imperative role of IT alignment in developing core business competencies which contribute to business success. Managers should share an understanding of role of IT in business processes and promote IT alignment. Managers should regard responsiveness as an imperative to compete, succeed, and thrive in fast changing business environments. alignment. Managers should be aware that building collaborative relationships is critical when doing business in dynamic environments. 14

15 Thank you! 15