Investigating the Mediating Effect of Business-IT Alignment between Management of IT Investment and Firm Performance

ABSTRACT

Studies on the effect of business-IT alignment between the management of IT investment and firm performance are scarce. This study focuses on process theory, resource-based view, and Val-IT 2.0, to investigate how business-IT alignment mediates the management of IT investment and firm performance using 194 Chinese IT and business managers’ responses. Findings reveal a significant impact on the hypotheses, whereas alignment mediates the proposed link. This study theoretically contributes and suggests insightful implications for practitioners.

KEYWORDS:

• Management of IT investment
• business-IT alignment
• firm performance

Acknowledgments

This study was conducted under and supported by the National Natural Science Foundation of China (Project No. 71810107003). We are grateful to the editor in chief, handling editor and anonymous reviewers for their valuable comments to enhance the quality of our manuscript.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. Ali et al. (2015) differentiated managing IT investment from IT investment governance. Managing IT investment is mainly the responsibility of the management hierarchy, whereas the IT investment governance is the responsibility of boards of directors including top management team members.

2. Val-IT 2.0 means Value IT 2.0: a set of practical governance principles and practices that help the board and executive management to optimize the value from IT investments (Val, 2008).

3. The concept of IT governance refers the configuration of firm resources to ensure effective management of IT (ITGI, 2003; Prasad & Green, 2015).

4. The Control Objectives for Information and related Technology (COBIT) is the most renowned framework for IT governance maturity assessments by the IT Governance Institute. This framework offers a definition of IT governance as consisting of four domains and 34 processes. Each process contains a number of IT governance maturity indicators, such as activities, documents, metrics, and support for role and responsibility assignment (Simonsson et al., 2010; Wilkin et al., 2012).

5. It views IT governance onto a higher level of abstraction by offering general directions on how to manage IT from a business point of view. Val IT clearly focuses on the interface between IT and the business. Val IT commence from where COBIT ends, follows the same structure and templates as provided in the COBIT and the two frameworks complement each other well (Simonsson et al., 2010; Van Grembergen & De Haes, 2009).

6. The arrow from management of IT investment -> firm performance aims to test the direct effect.

7. The ethical clearance agreement signed by the respondents for this study informed them that the data gathered through the distribution of the questionnaire would be used only for this research purpose, and that their identities would not be revealed to outsiders for any reason.

Additional information

Notes on contributors

Aboobucker Ilmudeen

Dr. Aboobucker Ilmudeen completed his PhD in Management Science and Engineering at the School of Management, Huazhong University of Science and Technology. Currently, he is working as a Senior Lecturer in management and IT at the South Eastern University of Sri Lanka. His research interests are IT governance, business-IT alignment, big data, IT-enabled capabilities and healthcare. He has published in many peer-reviewed index journals such as industrial management and data systems, review of managerial sciences, journal of enterprise information management, European journal of innovation management, benchmarking: an international journal, foresight, business information review, information development, cogent business and management.

Yukun Bao

Dr. Yukun Bao is a Professor at the School of Management, Huazhong University of Science and Technology, China, and the Deputy Director of Center for Modern Information Management at the same university. His research interests are in computational intelligence-based predictive analytics, information systems and IT management. He has published more than 80 papers, and has been the principal investigator for four research projects funded by the National Science Foundation of China. He received the IBM’s Excellent Faculty Award in 2012. He is a senior member of IEEE, Associate Editor of Neurocomputing and the Journal of Systems and Information Technology.

Peilin Zhang

Peilin Zhang is currently with the Newcastle Business School, University of Newcastle, Australia. She received her MSc and BSc degrees in Business Administration from the University of Nebraska, USA. Her research interests include live stream influencer marketing and business analytics, and she has published papers in these areas. She is involved in courses such as Consumer Behaviour and Introduction to Information Systems at the University of Newcastle.