Does IT pay to focus? An analysis of IT business value under single and multi-focused business strategies

Previous research finds that firm performance is highest when firms maintain a singular strategic focus as opposed to a multi-focused strategy. Yet, from an IT perspective, there is still some debate as to whether IT business value or the contribution of IT to firm performance is also maximized when firms maintain a single-focused strategy. Using the notion of value disciplines to model strategic foci, we find in a matched survey of executives in 241 firms that IT business value is highest in firms with a multi-focused business strategy and lowest in those with a single focus. We also find a relationship between strategic foci and the primary locus of IT value within the value chain for all focus-types except those emphasizing operational excellence. If all firms are using IT to reduce operating expenses, operationally excellent firms may find it increasingly difficult to sustain a low-cost advantage over time through IT.     

Implementing enterprise resource planning systems: organizational performance and the duration of the implementation

This paper examines the impact of the duration of ERP implementation on firm performance both during and after implementation. Organizations choose either an accelerated implementation approach or a traditional (longer) implementation approach. The former approach gives the organization the advantage of speed, but the disadvantage of fitting its processes to that of a packaged (thus, undifferentiated from competitors) ERP. The latter approach allows the organization to redesign strategy and processes, and thus, search for ways to be unique from its competition. The study uses a regression model to capture the changes in various performance measures during and after implementation between firms that implemented the ERP, using the performance measure of a matched group of firms that did not implement an ERP as a benchmark/control sample, on the basis of the duration of the implementation. Financial data from Compustat, and data on start date and end date of ERP implementation between 1990 and 2005 for firms in the Oil and Gas industry was collected from an ERP vendor. Results show that measures such as return on sales improved after implementation. However, measures such as inventory turnover, which reflect operational benefits, improve during implementation. We find that accelerated implementation confers both operational and strategic benefits. This study highlights the strategic consequences of the different choices of implementation.     

Measuring Information Technology's Indirect Impact on Firm Performance

It has been recognized that the link between information technology (IT) investment and firm performance is indirect due to the effect of mediating and moderating variables. For example, in the banking industry, the IT-value added activity helps to effectively generate funds from the customer in the forms of deposits. Profits then are generated by using deposits as a source of investment funds. Traditional efficiency models, such as data envelopment analysis (DEA), can only measure the efficiency of one specific stage when a two-stage production process is present. We develop an efficiency model that identifies the efficient frontier of a two-stage production process linked by intermediate measures. A set of firms in the banking industry is used to illustrate how the new model can be utilized to (i) characterize the indirect impact of IT on firm performance, (ii) identify the efficient frontier of two principal value-added stages related to IT investment and profit generation, and (iii) highlight those firms that can be further analyzed for best practice benchmarking.     

The leveraging influence of strategic alignment on IT investment: An empirical examination

Businesses have invested enormous sums in information technology (IT). The challenge now is to optimize these investments. We empirically examined the influence of the alignment between IS strategy and business strategy (strategic alignment) on the payoff of IT investment. Many studies have been performed on the value of IT investment and strategic alignment separately, in the past, but here we combined them by investigating the moderating affect of strategic alignment on the relationship between IT investment and firm performance for a group of manufacturing firms. The results indicated that there is a synergistic coupling between strategic alignment and IT investment with firm performance. Firms that have aligned IT and business strategies can invest in additional IT resources with some assurance that they will be leveraged substantially. One of our main contributions was in the examination of four differing perspectives of strategic alignment and their relationship with the payoff of IT investment.     

A Multilevel Model of Information Technology Value

Traditionally, firms that dominate their industries perform better when their markets are growing. This is because their large size makes it easier for them to achieve economies of scale. We present empirical evidence that the impact of information technology (IT) on the firm performance is the opposite: firms with less market power enjoy greater benefits in a growing market. This study draws on the IT value literature to examine how industry and firm attributes jointly affect firms’ returns on their IT investments. To that end, we develop cross-level hypotheses to examine how the economic value of IT to firms is influenced by industry growth and firm size. By using a hierarchical linear model to test the industry–firm interactions, we are able to control for violations of statistical assumptions that are likely to bias cross-level estimates obtained using conventional statistical methods. The implications of these findings for research and practice are examined.     

Determinants of website development: a study of electronic commerce in Singapore

The website is the portal through which most of the electronic transactions are conducted today. The site’s development provides a glimpse of the firm’s electronic commerce (E-commerce) strategic objectives. Yet, few studies on E-commerce have related the firm’s website to its strategy. This paper examined the relationships between the strategic variables of competitive intensity, existing competencies of the firm, firm size, and strategic commitment on the one hand, and the development of the firm’s website, on the other. We developed a model based on existing literature in E-commerce and strategy. The study was conducted with 135 firms from the travel, financial and information technology (IT) sectors in Singapore. Results show that competitive intensity, firm size and existing competencies positively influence the firm’s strategic commitment to E-commerce. The commitment in turn affects the website development. We also show that websites can be classified according to their developmental level.     

A study of enterprise resource planning (ERP) system performance measurement using the quantitative balanced scorecard approach

Enterprise resource planning (ERP) systems have been used in integrating information and accelerating its distribution across functions and departments with the aim to increase organizations’ operational performance. Thus, it is worth measuring ERP system performance based on its impact to critical performance of an organization: this requires a systematic method that bridges ERP performance measurement and key organizational performance. The hierarchical balanced scorecard (HBSC) model with respect to multiple criteria decision-making is such a systematic approach to ERP performance measurement. An ERP evaluation framework that integrates the balanced scorecard dimensions, linguistic variables, and non-additive fuzzy integral provides an objective approach to measuring both the performance level of the ERP system and its contribution to the strategic objectives of high-tech firms. Taking Taiwan’s high-tech firms as an example, this study demonstrates the effectiveness of this integrated approach to measure the performance of ERP systems at the post-implementation stage under evaluators’ subjective, uncertainty, and vagueness judgments.     

Designing a knowledge-based system for strategic planning: A balanced scorecard perspective

First developed by Kaplan and Norton [Kaplan R. S., & Norton D. P. (1992). The balance scorecard – measures that drive performance. Harvard Business Review, 70(1), 71–79], balanced scorecard (BSC) provides an integrated view of overall organizational performance and strategic objectives. BSC integrates financial measures with other key performance indicators to create a perspective that incorporates both financial and non-financial aspects. BSC has proven a powerful tool for strategic planning and communicating strategy that assists in strategy implementation. Successful strategy implementation is based on effective strategic planning. Owing to the strategic planning being a virtual necessity in business, this work proposes an integrated approach for the balanced scorecard tool and knowledge-based system using the analytic hierarchy process (AHP) method, and then develops an intellectual BSC knowledge-based system for strategic planning that sets or selects firm management or operational strategies based on the following perspectives: learning and growth, internal/business process, customer, and financial performance. This system can help determine specific strategy weights. The intellectual BSC knowledge-based system facilities efficient automated strategic planning.     

The strategic value of IT insourcing: An IT-enabled business process perspective

Although research on the business impact of IT outsourcing abounds, little is known about the relative strategic value of IT outsourcing and IT insourcing. Drawing upon the knowledge-based view of the firm, this study postulates that, compared with IT outsourcing, IT insourcing is more effective for developing IT-enabled business processes (IEBP), which subsequently lead to superior firm performance. Our analysis of the data from InformationWeek and Compustat shows that IT insourcing is positively associated with IEBP, while the relationship between IT outsourcing and IEBP is not statistically significant. We also find that IEBP have a significant influence on firm performance. Finally, the effect of IT sourcing mechanisms on IEBP and the effect of IEBP on firm performance are both moderated by the type of innovation related to IEBP. The results suggest that in order to improve their performance firms should consider IT an integral part of their strategic core and should be proactively involved in the internal development of IT resources. We conclude with managerial implications and directions for future research.     

Evaluating organizational efficiency resulting from information technology investment: an application of data envelopment analysis

Abstract. Even during this recessionary era, information technology (IT) expenditure in most organizations continues to grow at a high rate. Because of this increased IT expenditure, more and more senior managers are demanding that IT play a greater role in determining their firm's success by helping them increase organizational efficiencies and perhaps even achieve competitive advantage. The existing information systems literature on IT investment and organizational strategic performance, however, provides very little help to senior managers in making before-the-fact IT investment decisions. The present research study puts forth some 'hard' evidence relating IT investment to organizational strategic and economic performance by using data envelopment analysis (DEA). Eight IT investment measures were used as inputs and 10 organizational strategic and economic performance ratios were used as outputs for the DEA model. The results indicate that two-thirds of the organizations in this research study are deemed efficient by DEA. A clear distinction exists between the efficient group and the inefficient group in terms of IT investment and organizational strategic and economic performance. The firms in the efficient group had a much higher return on their information technology investment than the inefficient group. In addition, the DEA results pinpoint the inefficient inputs and deficient outputs for an inefficient firm allowing a senior manager to take corrective actions to compensate for the situation.     

The Impact of Information Technology Investment on Enterprise Performance: A Case Study

Investment in information technology is steadily increasing, but many organizations find it difficult to formally assess the value of IT investments because the latter are often incorporated into broad management initiatives. the authors believe that the results of the research study reported on here can help firms to develop a better understanding of the dynamic relationship between IT investment and performance at both the firm and industry levels of analysis. This study clearly demonstrates the importance of adopting an organizational change perspective when assessing the impact of IT investment on firm performance.     

Measuring firm performance using financial ratios: A decision tree approach

Determining the firm performance using a set of financial measures/ratios has been an interesting and challenging problem for many researchers and practitioners. Identification of factors (i.e., financial measures/ratios) that can accurately predict the firm performance is of great interest to any decision maker. In this study, we employed a two-step analysis methodology: first, using exploratory factor analysis (EFA) we identified (and validated) underlying dimensions of the financial ratios, followed by using predictive modeling methods to discover the potential relationships between the firm performance and financial ratios. Four popular decision tree algorithms (CHAID, C5.0, QUEST and C&RT) were used to investigate the impact of financial ratios on firm performance. After developing prediction models, information fusion-based sensitivity analyses were performed to measure the relative importance of independent variables. The results showed the CHAID and C5.0 decision tree algorithms produced the best prediction accuracy. Sensitivity analysis results indicated that Earnings Before Tax-to-Equity Ratio and Net Profit Margin are the two most important variables.     

Does it pay to align a firm’s competitive strategy with its industry IT strategic role?

While researchers have increasingly recognized the importance of information technology (IT) in leveraging a firm’s competitive strategy for achieving superior firm performance, our understanding of the nature of how a firm’s competitive strategy aligns with its industry IT strategic role and how such alignment influences firm performance remains limited. Drawing upon strategic alignment perspective, this study aims to theorize and empirically test how the firm’s competitive strategy (i.e., cost leadership, differentiation, and dual strategy) aligns with its industry IT strategic role to improve firm performance. Based on the data of Chinese publicly listed firms during 2009–2015, our results indicate that different competitive strategy aligns with different industry IT strategic roles for achieving superior performance. Specifically, cost leadership strategy aligns with automate IT strategic role, dual strategy aligns with informate IT strategic role, and differentiation strategy aligns with transform IT strategic role in generating superior firm performance. We also discuss the theoretical and practical implications of the current study.     

Associating organizational strategic performance with information technology investment: an exploratory research

In the last twenty years, firms have witnessed an explosive growth in information technology (IT) investment. This is true both for manufacturing industries and service industries. The existing literature on IT investment and organizational strategic performance, however, provides very little evidence linking IT investment to organizational strategic and economic performance. The present research investigates whether certain IT investment measures are useful in differentiating organizational economic performance among the most effective information technology users. Eight measures were used to represent IT investment. Ten ratios were utilised to measure organizational strategic and economic performance. The sample organizations were analysed using multidimensional cluster analysis. The results of the analysis suggest that a clear distinction exists between organizations in terms of IT investment and organizational strategic and economic performance. This is true even among the most effective users of information technology. The results also suggest that the majority of the organizations that are investing more in IT seem to be achieving superior strategic and economic performance.     

The synergistic effects of IT-enabled resources on organizational capabilities and firm performance

Computing the value of IT investments and clarifying how the portfolio of IT/IS resources affect a firm's performance and sustainable competitive advantage are critical issues today. We attempted to develop an effective measurement technique and use organizational theory to discover the strategic role of IT-enabled resources in the firm's competitive agenda. Based on a resource-based view of the firm, we proposed a way to evaluate the synergistic effect of such resources on the firm's capabilities, as they, influence the firms’ strategic objectives and improve its financial performance. The technological, human, and organizational resources work together to generate sub-additive cost and super-additive value synergies. Operations, R&D, and marketing capabilities allow firms to implement a business strategy that reflects its customer needs. A survey was conducted to check our framework. Our findings should provide valuable decision guides for practitioners when choosing a portfolio of IT/IS resources for implementing business strategies.     

Exploratory analysis on the halo effect of strategic goals on IOS effectiveness evaluation

How do managers evaluate the effectiveness of IT use? Past literature showed that the assessment of IT effectiveness is not straightforward, especially when viewed in terms of “business outcomes,” such as sales increase, firm profitability, and firm success. For inter-organizational systems (IOS), IT effectiveness evaluation is even more challenging, because these IOS are an integral part of a retail channel distribution system where several factors can influence business outcomes. Under such circumstances, IOS effectiveness evaluation is prone to a halo effect. A survey of retailers and suppliers showed that firms favorably judge IOS as long as their strategic goals are met, even when they do not recognize any IOS contribution towards accomplishing them. Conversely, IOS use was not appreciated when strategic goals were not met—even if IOS use benefits the firm at the operational or tactical level. In effect, IOS evaluation was overshadowed by the halo effects of strategic goal accomplishment.     

Constructing information technology (IT) portfolios to achieve enterprise strategic goals in multi-business unit firms

This study aims to develop a new methodology in IT Portfolio Management (ITPM) to address the impact of portfolio priorities on IT strategies in a multi-business unit firm. The methodology includes a new ITPM model and uses simulated scenarios to overcome limitations due to insufficient real-world organizational IT portfolio data. The weight scores generated by the proposed ITPM model can enable the firm to create a rational viewpoint to improve its IT investment efficiency while establishing IT priorities to achieve enterprise strategic goals. Such an approach would enable firms to reduce their reliance on CIO intuition in guiding firms’ technology portfolios.     

Do e-business strategies matter? The antecedents and relationship with firm performance

Previous studies in e-business strategy focus on the issues of strategic positioning and its impact on firm performance. However, these studies do not address the antecedents to business strategies formulation and their impact on business performance or the role of business models in explaining e-business firm performance. This study applies Porter’s generic strategies to the e-business context. It also identifies business models that are applied to the e-business environment and environmental factors and then examines these factors influence on firm performance with survey data. This study finds that uncertainty has a negative impact on the choice of strategic position of e-business firms, whereas market turbulence positively affects the level of adoption of all the strategies. Among the strategic positions, marketing differentiation positively influences firm performance. The research methodology, test results, and implications are further discussed.     

Green practices-IS alignment and environmental performance: The mediating effects of coordination

The problem of environmental sustainability has been growing in recent years with an interest from both researchers and practitioners. A major gap that exists is the absence of empirical studies that addressed business value of green IS (information systems). Thus, drawing on the resource-based view of the firm and IT (information technology) business value literature, this study aims to develop a comprehensive research model of green practice-IS alignment, the key cross-functional coordination of green practices with manufacturing and marketing functions, and firm performance. The study provides a better understanding of the relationship between green practice-manufacturing coordination and green practice-marketing coordination, and how both variables mediated the relationship between green practices-IS alignment and environmental performance. The data used in this study were collected from manufacturing firms. The results show that a firm’s green practices-IS alignment had a positive effect on both green practices-manufacturing coordination and green practices-marketing coordination. In turn, both green practices-manufacturing coordination and green practices-marketing coordination are the significant predictors of environmental performance. Meanwhile, green practices-IS alignment had an indirect effect on environmental performance via both green practices-manufacturing coordination and green practices-marketing coordination. Moreover, the findings of this study show that environmental performance is an important predictor of economic performance.     

The impact of information technology on the financial performance of diversified firms

Diversification may increase economic benefits through more efficient utilization of business resources across multiple markets. However, the benefits of these scope economies are often not realized due to costs of coordinating resources in multiple markets. Information technology (IT) is widely used to achieve more efficient coordination by reducing the costs of coordinating business resources across multiple markets. Because of the need for coordination of business resources across multiple markets, diversification can increase the demand for IT. But does increased use of IT improve the performance of diversified firms? This research tackles this question by undertaking an empirical study of the impact of IT on the financial performance resulting from diversification by focusing on the strategic direction chosen by different firms. The empirical aspects of this subject have received little attention from previous information systems (IS) and economics research. This research also sheds light on the business value of IT by showing the importance of complementarity between IT and strategy in firm performance, a subject which has also received limited attention in prior IS research.