BUSINESS VALUE OF INFORMATION TECHNOLOGY IN NETWORK ENVIRONMENTS

Abstract

Information Technology (IT) business value research is suggested as fundamental to the contribution of the IS discipline. The IS research community has accumulated a critical mass of IT business value studies, but only limited or mixed results have been found on the direct relationship between IT and firm performance. Extant studies mostly focus on whether IT creates business value and demonstrate indirect relationships between IT and some aspects of firm value; however, the question of why and how IT can do so remains understudied. These limitations lead to the challenge where existing IT business value studies have not done enough on providing feasible, practical guidance for IT practitioners and have had lacking relevance to the business world. In this study I propose the concept of dynamic IT capability (DIC), defined as the ability of a firm to build, integrate, and upgrade IT resources to improve, enhance, and reengineer business processes as responses to rapidly changing environments, and apply it in network environments. Using data of 26 companies over a span of 8 years from a number of secondary sources, I examined the direct link between DIC and firm performance and the indirect link through the mediation of firm innovation, both moderated by network structures. The results of data analysis indicate that DIC is an important indicator of IT business value in network environments. DIC contributes to firm performance directly or indirectly through firm innovation. Also, DIC complements network structures to positively influence firm performance. These findings have important implications for both researchers and practitioners.