Mediating role of managing information technology and its impact on firm performance. Insight from China

DOIhttps://doi.org/10.1108/IMDS-06-2017-0252
Pages912-929
Publication Date14 May 2018
AuthorAboobucker Ilmudeen,Yukun Bao
SubjectInformation & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems
Mediating role of managing
information technology and its
impact on firm performance
Insight from China
Aboobucker Ilmudeen
Center for Modern Information Management, School of Management,
Huazhong University of Science and Technology, Wuhan, China and
Faculty of Management and Commerce, South Eastern University of Sri Lanka,
Oluvil, Sri Lanka, and
Yukun Bao
Center for Modern Information Management, School of Management,
Huazhong University of Science and Technology, Wuhan, China
Abstract
Purpose Managing IT with firm performance (FM) has always been a debatable topic in literature and
practice. Prior studies examining the above relationship have reportedmixed results and have yet ignored the
eminent managing IT practices. The purpose of this paper is to empiricallyinvestigate the relevance of Val-IT
2.0 practice in managing IT investment, and its mediating role in the FM context.
Design/methodology/approach This paper is developed on two themes of literature. First, managing IT
as a firms IT capability in order to generate value from IT investment. Second, IT as a firms resource under
resource-based view offers firms competence that deploys potentials in achieving FM. The structural
equation modeling with partial least squares techniques used for analyzing data collected from 176
organizations IT, and business executives in China.
Findings The results of this study show empirical evidence that Val-ITs components (value governance,
portfolio management, and investment management) are significantly linked to the management of IT (MIT),
and it found to be a significant mediator between Val-IT components and FM.
Research limitations/implications This research contributes to the literature and practice by way of
highlighting the value generation through managing IT on FM.
Originality/value This study is fully based on Val-IT 2.0 with the FM where the managing IT mediate this
relationship in a country-specific study in China. This study adds to the Chinese information system literature
which suffers the lack of empirical studies in the context of MIT research.
Keywords Firm performance, IT business managers, Managing IT, Value IT
Paper type Research paper
1. Introduction
For decades, executives and policy makers have always concerned the profitability of IT
investment while it is increasing radically (Kim et al., 2009; Lee et al., 2011; Mithas et al.,
2012; Prasad et al., 2010). It is obvious that IT investment can improve firm performance
(FM) (Turel et al., 2017), but investments in IT are not sufficient by themselves to affect FM
(Wang et al., 2015). Thus, it requires managing IT to realize its superior potential.
The practice of managing IT, e.g. the managerial efforts related to planning, organizing,
controlling, and directing the use of IT within an organization (Boynton and Zmud, 1987;
Van Der Zee and De Jong, 1999; Wang et al., 2015) has received a considerable attention
among information system (IS) scholars, and executives (Lowry and Wilson, 2016;
Mithas et al., 2012; Tallon et al., 2000; Xu et al., 2016).
China has been recognized that the worlds manufacturing center (Mingzhi Li et al., 2015;
Wang, Huo, Qi and Zhao, 2016) has transformed its economy to larger market orientation as
Industrial Management & Data
Systems
Vol. 118 No. 4, 2018
pp. 912-929
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-06-2017-0252
Received 9 June 2017
Revised 16 October 2017
Accepted 12 November 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
912
IMDS
118,4
a result, IT has been perceived to be an essential driver for their consequent business and
economic success (Davison et al., 2008; Dologite et al., 1998). The participation in the global
competition and the growing economy of China has called upon the massive accessibility of
IT, and IT is believed to be an ever more critical resource (Chen, 2010). Consequently,
Chinese firms have heavily invested in IT infrastructure and various ISs in recent years
(Peng et al., 2016; Shao et al., 2016). Further, the management of IT (MIT) still ruins
a new discipline and empirical research on IT issues in China are limited (Chen, 2010;
Wang et al., 2015).
The IT productivity paradox(inconsistency between massive IT investments and its
lack of benefits) has been examined in many Chinese firms context (Kim et al., 2009;
Peng et al., 2016). For example, studies aimed at identifying the real causes of IT
productivity paradox, will likely to have significant implications for firms in China, as they
struggle to generate business value from their IT investments (Peng et al., 2016). Besides,
some prior studies in Chinese context are in industry-specific (Kim et al., 2009; Wang, Xu,
Zhang and Chen, 2016), review based (Dologite et al., 1998; Li-Hua and Khalil, 2006), and
strategic planning oriented (Chi et al., 2017; Mao et al., 2016; Shao et al., 2016). Moreover, the
prior researches on IS issues in China have targeted organizational, and system or
software related issues and empirical research on the organization and strategic issues are
scarce (Davison et al., 2008; Ji et al., 2007; Peng et al., 2016). Similarly, the Chinese IS
management literature has focused the wide range of industrial, technical, and operational
issues (Chen, 2010; Davison et al., 2008). The MIT or the multifaceted socio-technical study
that influences on the FM has relatively received less attention. It is worth noting that,
research on the effects of IT investment on FM in developing countries will be an essential
area for future studies as well (Kim et al., 2009; Peng et al., 2016). Therefore, it is important
for a theory-driven empirical research needs to be done to deepen how the MIT can enrich
the FM on IS literature in the Chinese firm context.
Considering the ITs rising significance to the firms operations and performance, prior
studies show the underlying mechanism of how IT investment is enhancing FM.
For example, Prasad et al. (2010) found that IT governance initiatives are positively related
with IT-related capabilities; subsequently it relates to internal process-level performance,
which in turn improves customer service and firm-level performance. Ali et al. (2015)
presented the momentous link between IT investment governance components and
corporate performance. Wu et al. (2015) studied the effect of IT governance mechanisms on
organizational performance with strategic alignment as a mediator and found impactful
linkage among them. However, the prior literature falls in short, to empirically examine the
role of managing IT in FM, which subsequently needs a comprehensive framework
covering a wide spectrum of IT management activities. Hence, this study integrates Val-IT
2.0 framework with the MIT to examine how these effects on Chinese FM.
The Val-IT 2.0 framework is a comprehensive framework developed by IT Governance
Institute that assimilates a set of practical governance principles, practices and supporting
guidelinesto help executives andenterprise leaders tooptimize the realizationof value from IT
investments(IT Governance Institute, 2008). Val-ITprinciples are appliedin three domains,i.e.
value governance (VG) ensure valuemanagement practicessecure optimal valuefrom its IT-
enabled investments duringtheir full economic life cycle, portfolio management (PM) ensure
enterprisesecures optimal valueacross its portfolio of IT-enabled investments, and investment
management (IM) ensure enterprises each IT-enabled investments contribute to value
creation (IT Governance Institute, 2008; Wilkin et al., 2012). Val-IT 2.0 is closely aligned and
complementswith COBIT from business andfinancial perspective,but delivers value to firms
in its own right and supports professional who seeks IT investment decisions, and the
realization of business value from IT (Lombardi et al., 2016; IT Governance Institute, 2008;
Wilkin et al., 2012). The extensive literature analysis of Lombardi et al. (2016) recognized that
913
Managing
information
technology

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