Are Dynamic Capabilities the Missing Link Between the IS Strategy and Performance Relationship?: A Model and Exploratory Test at Three Levels of Environmental Dynamism

Abstract

This study examines two dynamic capabilities which are possible intervening mechanisms by which an information systems strategy relates to information systems performance. It also explores the relevance of the dynamic capabilities absorptive capacity and agility at three different levels of environmental dynamism. Responses from a sample of over 200 CIOs suggest that absorptive capacity and agility are indeed intervening mechanisms by which information systems strategy is linked to performance, particularly for innovative strategies and in environments that are highly dynamic. It suggests that pursuit of the strategy that is able to develop and maintain the highest levels of dynamic capabilities would be the one to likewise gain the most ground on performance. The findings also bring to light the fact that even in relatively stable environments, dynamic capabilities still play major roles in effectuating performance.

References

1. Adner, R. (2002). When are technologies disruptive? A demand-based view of the emergence of competition. Strategic Management Journal, 23(8), 667--688.
2. Adner, R., &Levinthal, D. (2001). Demand heterogeneity and technology evolution: Implications for product and process innovation. Management Science, 47(5), 611--628.
3. Baron, R. M., &Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173--1182.
4. Barreto, I. (2010). Dynamic capabilities: A review of past research and an agenda for the future. Journal of Management, 36(1), 256--280.
5. Bourgeois, L. J., &Eisenhardt, K. M. (1988). Strategic decision processes in high velocity environments: Four cases in the microcomputer industry. Management Science, 34(7), 816--835.
6. Braunscheidel, M. J., &Suresh, N. C. (2009). The organizational antecedents of a firm's supply chain agility for risk mitigation and response. Journal of Operations Management, 27(2), 119--140.
7. Brown, S., &Eisenhardt, K. (1997). The art of continuous change: Linking complexity theory and time-paced evolution in relentlessly shifting organizations. Administrative Science Quarterly, 42(1), 1--34.
8. Chan, Y. E., Huff, S. L., Barclay, D. W., &Copeland, D. G. (1997). Business strategic orientation, information systems strategic orientation, and strategic alignment. Information Systems Research, 8(2), 125--150.
9. Chen, D. Q., Mocker, M., Preston, D. S., &Teubner, A. (2010). Information systems strategy: Reconceptualization, measurement, and implications. MIS Quarterly, 34(2), 233--259.
10. Chin, W. W. (1998). The partial least squares approach for structural equation modeling. In G. A. Marcoulides (Ed.), Modern Methods for Business Research (pp. 295--336). Mahwah, NJ: Lawrence Erlbaum Associates.
11. Cohen, J. (1988). Statistical Power Analysis for the Behavioral Sciences. Hillsdale, NJ: Lawrence Erlbaum Associates.
12. Cohen, W. M., &Levinthal, D. A. (1990). Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35(1), 128--152.
13. D'Aveni, R. (1994). Hypercompetition: Managing the Dynamics of Strategic Management, New York: Free Press.
14. Eisenhardt, K. M., &Martin, J. A. (2000). Dynamic capabilities: What are they? Strategic Management Journal, 21(10), 1105--1121. Ettlie, J. E. (1998). R&D and global manufacturing performance. Management Science, 44(1), 1--11.
15. Fornell, C., &Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39--50.
16. Galliers, R. D. (1991). Strategic information systems planning: Myths, reality and guidelines for successful implementation. European Journal of Information Systems, 1(1), 55--64.
17. George, G., Zahra, S. A., Wheatley, K. K., &Khan, R. (2001). The effects of alliance portfolio characteristics and absorptive capacity on performance: A study of biotechnology firms. Journal of High Technology Management Research, 12(2), 205--226.
18. Hair, J. F., Black, W. C., Babin, B. J., &Anderson, R. E. (2009). Multivariate Data Analysis, 7th ed. Upper Saddle River, NJ: Prentice Hall.
19. Hair, J. F., Black, W. C., Babin, B. J., &Anderson, R. E. (2014). Multivariate Data Analysis, 7th ed. Pearson New International Edition. Pearson Education Limited.
20. Helfat, C. E., &Peteraf, M. A. (2003). The dynamic resource-based view: Capability lifecycles. Strategic Management Journal, 24(10), 997--1010.
21. Helm, S. Eggert, A., &Garnefeld, I. (2010). Modeling the impact of corporate reputation on customer satisfaction and loyalty using partial least squares. In V. E. Vinzi, W. W. Chin, J. Henseler, &H. Wang (Eds.), Handbook of Partial Least Squares (pp. 515--534). Berlin, Germany: Springer.
22. Hoyle, R. H., &Kenny, D. A. (1999). Sample size, reliability, and tests of statistical mediation. In R. H. Hoyle (Ed.), Statistical Strategies for Small Sample Research (pp. 195--222). Thousand Oaks: Sage.
23. Iacobucci, D., &Duhachek, A. (2004). Roundtable mediation analysis. Advances in Consumer Research, 31(1), 395.
24. Jarvis, C. B., Mackenzie, S. B., &Podsakoff, P. M. (2003). A critical review of construct indicators and measurement model misspecification in marketing and consumer research. Journal of Consumer Research, 30(2), 199--218.
25. Jaworski, B.J., &Kohli, A.K., (1993). Market orientation: Antecedents and consequences. Journal of Marketing, 57(3), 53--70.
26. Judd, C.M., &Kenny, D.A. (1981). Estimating the Effects of Social Interventions. Cambridge, UK: Cambridge Univ. Press.
27. Kale, P., &Singh, H. (2007). Building firm capabilities through learning: The role of the alliance learning process in alliance capability and firm-level alliance success. Strategic Management Journal, 28(10), 981--1000. King, A. A., &Tucci, C. L. (2002). Incumbent entry into new market niches: The role of experience and managerial choice in the creation of dynamic capabilities. Management Sci., 48(2), 171--186.
28. Lane, P. J., Koka, B. R., &Pathak, S. (2006). The reification of absorptive capacity: A critical review and rejuvenation of the construct. Academy of Management Review, 31(4), 833--863.
29. Lane, P. J., Salk, J. E., &Lyles, M. A. (2001). Absorptive capacity, learning, and performance in international joint ventures. Strategic Management Journal, 22(2), 1139--1161.
30. Leidner, D. E., and Lo, J., &Preston, D. S. (2011). An empirical investigation of the relationship of IS strategy with firm performance. Journal of Strategic Information Systems, 20(4), 419--437.
31. Levy, M., Powell, P., &Galliers, R. (1999). Assessing information systems strategy development frameworks in SMEs. Information &Management, 36(5), 247--261.
32. Lindell, M. K., &Whitney, D. J. (2001). Accounting for common method variance in cross-sectional research designs. Journal of Applied Psychology, 86(1), 114--121.
33. Lofstrom, S. M. (2000). Absorptive capacity in strategic alliances: Investigating the effects of individuals' social and human capital on inter-firm learning. Organization Science Winter Conference, Keystone, CO.
34. MacKinnon, D. P., Fairchild, A. J., &Fritz, M. S. (2007). Mediation analysis. Annual Review of Psychology, 58, 593--614.
35. Makadok, R. (2001). Toward a synthesis of the resource-based and dynamic-capability views of rent creation. Strategic Management Journal, 22(5), 387--401.
36. Martinez-Simarro, D., Devece, C., &Llopis-Albert, C. (2015). How information systems strategy moderates the relationship between business strategy and performance. Journal of Business Research, 68(7), 1592--1594.
37. Mata, F. J., Fuerst, W. L., &Barney, J. B. (1995). Information technology and sustained competitive advantage: A resource-based analysis. MIS Quarterly, 19(4), 487--505.
38. Melville, N., Kraemer, K., &Gurbaxani, V. (2004). Review: Information technology and organizational performance: An integrative model of IT business value. MIS Quarterly, 28(2), 283--322.
39. Mintzberg, H., &Lampel, J. (1999). Reflecting on the strategy process. Sloan Management Review, 40(3), 21--30.
40. Nadkarni, S., &Narayanan, V. K. (2007). Strategic schemas, strategic flexibility, and firm performance: The moderating role of industry clockspeed. Strategic Management Journal, 28(3), 243--270. Overby, E., Bharadwaj, A., &Sambamurthy, V. (2006). Enterprise agility and the enabling role of information technology. European Journal of Information Systems, 15(2), 120--131.
41. Pavlou, P. A., & El Sawy, O. A. (2006). From IT leveraging competence to competitive advantage in turbulent environments: The case of new product development. Information Systems Research, 17(3), 198--227.
42. Pavlou, P. A., &El Sawy, O. A. (2010). The "third hand": IT-enabled competitive advantage in turbulence through improvisational capabilities. Information Systems Research, 21(3), 443--471.
43. Pavlou, P. A., &Gefen, D. (2005). Psychological contract violation in online marketplaces: Antecedents, consequences, and moderating role. Information Systems Research, 16(4), 372--399.
44. Pavlou, P. A., Liang, H., &Xue, Y. (2007). Understanding and mitigating uncertainty in online exchange relationships: A principal-agent perspective. MIS Quarterly, 31(1), 105--136.
45. Peppard, J., Galliers, R. D., &Thorogood, A. (2014). Information systems strategy as practice: Micro strategy and strategizing for IS. Journal of Strategic Information Systems, 23(1), 1--10.
46. Pervan, G. (1998). How chief executive officers in large organizations view the management of their information systems. Journal of Information Technology, 13(2), 95--109.
47. Petter, S., Straub, D., &Rai, A. (2007). Specifying formative constructs in information systems research. MIS Quarterly, 31(4), 623--656.
48. Podsakoff, P. M., MacKenzie, S. B., Lee, J. Y., &Podsakoff, N. P. (2003). Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879--903.
49. Premkumar, G., &King, W. R. (1994). Organizational characteristics and information systems planning: an empirical study. Information Systems Research, 5(2), 75--109.
50. Preston, D. S., Chen, D., &Leidner, D. E. (2008). Examining the antecedents and consequences of CIO strategic decision-making authority: An empirical study. Decision Sciences, 39(4), 605--642.
51. Preston, D. S., &Karahanna, E. (2009). Antecedents of IS strategic alignment: A nomological network. Information Systems Research, 20(2), 159--179.
52. Priem, R. L., & Butler, J. E. (2001). Is the Resource-Based "View" a Useful Perspective for Strategic Management Research? Academy of Management Review, 26(1), 22--40.
53. Ray, G., Muhanna, W. A., &Barney, J. B. (2005). Information technology and the performance of the customer service process: A resource-based analysis. MIS Quarterly, 29(4), 625--652. Ringle, C. M., Wende, S., &Becker, J. M. (2014). SmartPLS 3. Hamburg: SmartPLS. Retrieved from http://www.smartpls.com.
54. Roberts, N., Galluch, P. S., Dinger, M., &Grover, V. (2012). Absorptive capacity and information systems research: Review, synthesis, and directions for future research. MIS Quarterly, 36(2), 625--648.
55. Robins, R. W., Hendin, H. M., &Trzesniewski, K. H. (2001). Measuring global self-esteem: Construct validation of a single-item measure and the Rosenberg self-esteem scale. Personality and Social Psychology Bulletin, 27(2), 151--161.
56. Sambamurthy, V., Bharadwaj, A., &Grover, V. (2003). Shaping agility through digital options: Reconceptualizing the role of information technology in contemporary firms. MIS Quarterly, 27(2), 237--263.
57. Seo, D., &La Paz, A. I. (2008). Exploring the dark side of IS in achieving organizational agility. Communications of the ACM, 51(11), 136--139.
58. Sethi, R., &Iqbal, Z., (2008). Stage-gate controls, learning failure, and adverse effect on novel new products. Journal of Marketing, 72(1), 118--134.
59. Sherehiy, B., Karwowski, W., &Layer, J. K. (2007). A review of enterprise agility: Concepts, frameworks, and attributes. International Journal of Industrial Ergonomics, 37(5), 445--460.
60. Simerly, R. L., &Li, M. (2000). Environmental dynamism, capital structure and performance: A theoretical integration and an empirical test. Strategic Management Journal, 21(1): 31--49.
61. Slater, D. (2002). Mistakes: Strategic planning don'ts (and Dos). CIO.com, June 1. http://www.cio.com/article/31106/Mistakes_Strategic_Planning_Don_ts_and_Dos_ (accessed January 14, 2011).
62. Slater, S. F., Olson, E. M., &Hult, G. T. M. (2006). The moderating influence of strategic orientation on the strategy formation capability-performance relationship. Strategic Management Journal, 27(12), 1221--1231.
63. Sobel, M. E. (1982). Asymptotic confidence intervals for indirect effects in structural equations models. In S. Leinhart (Ed.), Sociological Methodology (pp. 290--312). San Francisco, CA: Jossey-Bass.
64. Tallon, P. P. (2008). Inside the adaptive enterprise: An information technology capabilities perspective on business process agility. Information Technology Management, 9(1), 21--36.
65. Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319--1350. Teece, D. J., Pisano, G., &Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509--533.
66. Teubner, R. A. (2007). Strategic information systems planning: A case study from the financial services industry. Journal of Strategic Information Systems, 16(1), 105--125.
67. Teubner, R. A. (2013). Information systems strategy: Theory, practice, and challenges for future research. Business &Information Systems Engineering, 5(4), 243--257.
68. Tripsas, M. (2008). Customer preference discontinuities: A trigger for radical technological change. Managerial and Decision Economics, 29(2--3), 79--97.
69. Trochim, W. M. K., &Donnelly, J. P. (2007). The Research Methods Knowledge Base, 3rd ed. Cincinnati, OH: Atomic Dog.
70. Tu, Q., Vonderembse, M. A., Ragu-Nathan, T. S., &Sharkey, T. W. (2006). Absorptive capacity: Enhancing the assimilation of time-based manufacturing practices. Journal of Operations Management, 24(5), 692--710.
71. Van Wijk, R., Van den Bosch, F., &Volberda, H. (2001). The impact of knowledge depth and breadth of absorbed knowledge on levels of exploration and exploitation. Academy of Management Conference, Washington, D.C.
72. Wheeler, B. C. (2002). NEBIC: A dynamic capabilities theory for assessing net-enablement. Information Systems Research, 13(2), 125--146.
73. Wilden, R., Gudergan, S. P., Nielsen, B. B., &Lings, I. (2013). Dynamic capabilities and performance: Strategy, structure and environment. Long Range Planning, 46(1--2), 72--96.
74. Winter, S. (2003). Understanding dynamic capabilities. Strategic Management Journal, 24(10), 991--995.
75. Zahra, S. A., &George, G. (2002). Absorptive capacity: A review, reconceptualization, and extension. Academy of Management Review, 27(2), 185--203.
76. Zahra, S. A., Sapienza, H. J., &Davidsson, P. (2006). Entrepreneurship and dynamic capabilities: A review, model and research agenda. Journal of Management Studies, 43(4), 917--955.
77. Zollo, M., &Singh, H. (1998). The impact of knowledge codification, experience trajectories and integration strategies on the performance of corporate acquisitions. Academy of Management Best Paper Proceedings. San Diego, CA.
78. Zollo, M., &Winter, S. G. (2002). Deliberate learning and the evolution of dynamic capabilities. Organization Science, 13(3), 339--351.

Index Terms

• Applied computing

  • Enterprise computing