The effect of business and information technology strategic alignment on information technology investment returns and corporate performance

The recent unparalleled level of information technology (IT) investments and the unprecedented growth in the Internet electronic market have expanded the dimensions of IT performance to the role of a business enabler that drives the business strategic direction. As with any investment, executives are concerned with maximizing the returns from their investment in IT. Yet, the studies have shown conflicting results on IT investment returns.; Although uncertainty persists in the question of return on IT investments, some organizations have realized the centrality of their information resources to their business. To maximize return on IT investments, business executives realize the necessity to align the business and IT strategies of an enterprise. This concept is evident in the literature; however, there is a lack of sufficient empirical evidence to support it. This study focuses on the relationship of the strategic alignment on IT investment returns and corporate performance and seeks such empirical evidence.; A survey of both Chief Executive Officers (CEOs) and Chief Information Officers (CIOs) of U.S. banks was conducted. Complete data for 72 firms was analyzed to determine the degree of alignment and its impact for each of seven strategic dimensions. The survey utilized Chan's STROIS model that incorporated Venkatraman's STROBE model to collect survey data and determine the strategic alignment.; The research results provide empirical evidence that supports the research hypothesis that closer alignment between business and IT strategies does lead to increased returns on IT investments and improved corporate performance. This relationship holds true for all firms regardless of strategic intent for IT. The study also shows a positive relationship between early adoption of new and emerging technology and business competitive advantage; thus, strategic alignment is deemed a competitive imperative.; Future research may include expansion of sample size to test in more detail the impact of each of the seven factors of the strategic alignment when firms outsource their IT functions; the study of IT investment measurement; and the roles of strategic alignment in IT management and the effect of time lag between changes in strategic alignment and subsequent improvements in IT business value.