An Empirical Study On Relationship Between IT Capability And Firm Performance

This paper was one of the results of the National Natural Science Foundation of China, "Theoretical study and empirical analysis of enterprises'IT capabilities from the resources-based view of firms" (Grant No.70601014) and the Natural Science Foundation of Shandong Province, 'Theoretical and empirical research on the enterprises'IT capabilities from the resources-based view of firms" (Grant No. Y2006H01).The role of information technology (IT) to business is more and more important. Its application in firm management has been the focus in domestic and international management science research. Scholars believed that the success of enterprises was not from the advanced nature of IT itself, but its IT capability.Resource-based view (RBV) provided a very good theoretical framework to the study of how IT influence and enhance the competitiveness of enterprises. According to the RBV and a large number of relevant literatures, IT capabilities were defined as repeatable patterns of actions in the mobilization and deployment of IS resources to attain sustained competitive advantage. Each dimension of IT capability, including IT technical capability, IT human capability and complementary capabilities between IT and other organizational resources, was identified and analyzed systematically, especially for neglected by previous studies on the complementary capabilities between IT and organizational resources. A systemic measurement system of IT capabilities stemming from theory was set up. The study provided good references for firms to develop IT capabilities with their own conditions and also built a solid foundation for the further study on the relationship between IT capabilities and firm performance.Business process performance was proposed to be the mediator variable. Finn performance was divided into three aspects, including market performance, financial performance and operational performance. Concrete measurements and a theoretical model of relationship between IT capability and firm performance were developed. Then an empirical method was used with the surveys of domestic enterprises and the relevant information collected. An empirical study was carried on the reasonableness of the constructs of IT capability and the relationship among firm performance variables, and revealed the impact mechanism of IT capability to firm performance and the intermediary role of business process performance. The results showed that firm performance at all levels had significant relationships; IT capability significantly affected on firm performance; business process performance had a significant intermediary role; complementary capabilities between IT and organizational resources had a significant effect on firm performance, but IT technology capability or IT human capability alone could not affect the performance. Each performance would be improved when the two combined. In addition, some suggestions and comments were raised for firms about engaging in information system investment and bringing up IT capability.