Proactive or reactive IT leaders? A test of two competing hypotheses of IT innovation and environment alignment

Abstract

When does it benefit a firm to take a lead in innovation with information technology (IT)? How should a firm align its IT innovation with a dynamic industry? In addressing these questions we present a typology of IT Innovation and Environment Alignment (ITIEA) based on a firm's IT innovation strategic orientation and the industry environment. The traditional ‘fit’ perspective predicts that a firm that matches its IT innovation with a dynamic environment would obtain performance benefits. In contrast, the ‘options’ perspective suggests that a firm that takes advantage of a stable environment to proactively pursue IT innovation and develop IT capability as real options would obtain performance advantage. We employ a quasi-experiment design to test these two competing hypotheses using archival data of IT leaders over a time frame of 6 years. We perform a longitudinal analysis of the performance change trajectories of proactive and reactive IT leaders over time. The results indicate a general support for the ‘options’ perspective that proactive IT leaders that lead in innovation with IT in relatively stable environments are found to consistently outperform reactive IT leaders in overall performance, allocative efficiency, and cost efficiency in management process. However, interestingly, the results also show a partial support for the ‘fit’ perspective that reactive IT leaders that emphasize intensive deployment of IT innovation in dynamic environments are found to obtain a cost advantage in production and operation process over time. The findings offer practical implications for managers to better engage in IT innovations to create and sustain competitive advantage. Synthesizing options thinking and dynamic capability perspective, we provide a framework to better understand IT innovation, dynamic environment, and performance outcomes. The findings also shed useful light on whether, when, and how to innovate with IT for sustained competitive advantage.

Keywords:

• IT innovation
• industry dynamism
• IT innovation-environment alignment
• real options theory
• fit
• longitudinal analysis

Additional information

Notes on contributors

Ying Lu

Dr Ying Lu is an assistant professor in management information systems (MIS) at the Belk College of Business at the University of North Carolina at Charlotte. She received her Ph.D. in MIS from the University of Wisconsin-Milwaukee. Her research interests include organizational impact of IT, IT business value, IS strategy, and IT innovation. Her current research focuses on understanding how, when, and why IT creates value to enterprises in fast changing volatile business environments.

Keshavamurthy Ramamurthy

Dr Keshavamurthy Ramamurthy is a professor of management information systems (MIS) at the Sheldon B. Lubar School of Business, University of Wisconsin-Milwaukee. He received his Ph.D. in business with an MIS concentration from the University of Pittsburgh. He has 20 years of industry experience, holding several senior technical and executive positions. He served as an associate editor for 4 years for MIS Quarterly. His current research interests include electronic commerce with inter-organizational systems/EDI and the internet; adoption, assimilation, and diffusion of modern IT; data resource management and data warehousing; IT business value; IT outsourcing; decision and knowledge systems for individuals and groups; and TQM including software quality. He has published over 44 research articles in major scholarly journals, including MIS Quarterly; Journal of Management Information Systems; Decision Sciences; IEEE Transactions on Software Engineering; European Journal of Information Systems; IEEE Transactions on Systems, Man and Cybernetics; Decision Support Systems; Information & Management; Journal of Organizational Computing and Electronic Commerce; International Journal of Electronic Commerce; IEEE Transactions on Engineering Management; International Journal of Production Research; International Journal of Human-Computer Studies; Journal of International Marketing; OMEGA; INFOR; and over 24 articles in refereed Conference Proceedings. He is a charter member of the Association for Information Systems, and elected to Beta Gamma and Sigma honor society.