Strategic IT-business alignment capability and organizational performance: roles of organizational agility and environmental factors
| DOI | https://doi.org/10.1108/JABS-09-2020-0371 |
| Published date | 16 June 2021 |
| Date | 16 June 2021 |
| Pages | 25-52 |
| Subject Matter | Strategy,International business |
| Author | Sukanya Panda |
Strategic IT-business alignment capability
and organizational performance: roles of
organizational agility and
environmental factors
Sukanya Panda
Abstract
Purpose –This study aims to test a model in which the effect of strategic information technology (IT)-
business alignment capability (hereafter referred to as ‘‘strategic alignment’’) on organizational
performance is examined via the mediating role of organizational agility [studied as operational
adjustment agility (OAA) and market capitalizing agility (MCA)] along with the moderating influence of
environmentaluncertainty.
Design/methodology/approach –The research uses surveydata accumulated from 220 managers (IT
and bank managers)working in the regional rural banks of Odisha, India. A structuralequation modelling
approachis used to investigate the strategic alignment-performancerelationship.
Findings –The findings demonstratethe positive effect of strategic alignmenton agility (studied as OAA
and MCA). This paper finds the positive effects of strategic alignment and both OAA and MCA on
organizational performance.The moderation analysis reveals that in an uncertain environment,strategic
alignment has more impact on MCA than OAA. However, the test of mediation exhibits OAA as a more
significant mediatorpromoting the strategic alignment-performancelinkage, than MCA. This was further
validatedfrom the moderated-mediation analysis.
Originality/value –Although previous researchstudies (mostly conducted in the context of developed
countries) have reported about the positive strategic alignment-agility-performance linkages, yet the
literatureis silent regarding the influence of external contingentfactors on these relationships from a rural
banking perspectivein a developing country setting (such as India).The research extends the strategic
alignment-agility-performance theories and provides empirical support forthese unique associations in
the context of rural banking in India and thereby, greatly contributes to the existing strategic alignment
literature.
Keywords Organizational performance, Strategic alignment, Environmental uncertainty,
Organizational agility, Structural modelling
Paper type Research paper
1. Introduction
Over the past three decades, strategic alignment has been extensively studied among
management practitioners and academicians. Although previous studies have defined
strategic alignment as the right coherence (fit) between business and information
technology (IT) strategies (Henderson and Venkatraman, 1999;Luftman et al.,2017), yet
most of them have studied it as an outcome to be achieved (Benbya and McKelvey, 2006)
with minimal focus on the process through which it can be accomplished. Due to limited
knowledge on the process of alignment, many organizations make vast IT investments
without exploring the extent of coherence between their IT and business objectives
Sukanya Panda is based at
the Department of
Computer Science and
Engineering, National
Institute of Technology
Rourkela, Rourkela, India.
Received 23 September 2020
Revised 2 January 2021
Accepted 22 February 2021
Indian Council of Social
Science Research (ICSSR),
India.
3–86/2018–19/PDF.
DOI 10.1108/JABS-09-2020-0371 VOL. 16 NO. 1 2022, pp. 25-52, ©Emerald Publishing Limited, ISSN 1558-7894 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 25
(Raymond and Croteau, 2009). According to Agarwal and Lucas (2005), demonstrating the
value of IT investment is essential to realize the contribution of the information systems
discipline. Strategic alignment promotes effective exploitation of IT resources to reinforce
business strategies which, in turn, maximize return on IT investments. Hence, it encourages
effective IT and business process integration and thereby, creates sustainable competitive
advantage (Baker et al., 2011;Sabeghand Motlagh, 2012).
A recent study conducted by Masa’deh et al. (2015) recommends that the interconnection
between IT and business strategies has not been clearly articulated. Some researchers
propose a type of strategic alignment where IT strategy could shape business strategy
(Henderson and Venkatraman, 1999), while others advocate various ways in which
business strategy determines ITstrategy (Sabherwal and Chan, 2001;Kearns and Lederer,
2003;Chan and Reich, 2007). However, newly advanced information communication
technologies have unleashed new opportunities for businesses in the form of global
connectivity (e.g. internet and mobile web) and computing (hardware and software).
Therefore, business infrastructures are impressively adapting into the new digital era by
reshaping traditional business strategy as modular and cross-functional business
processes, where work is carried out across boundaries of distance, time and function
(Kohli and Grover, 2008;Rai et al., 2012). As a result, the fusion between IT and business
strategies enables organizations to create differential value(Bharadwaj et al.,2013).
During the past few decades, most of the businesses spanning different industries and
sectors have become digital with the pervasive use of IT in India and the Indian Banking
industry is no different from other industries concerning digitalization of business
operations. Digitalization of Indian banking operations initiated in the late 1980s to improve
customer service, bookkeeping, management information system reporting, etc
(Harchekar, 2018;Nayak, 2018;Singh and Malik, 2019). Although, digital banking has
transformed conventional banking to convenience banking in India, mostly the public and
private sector banks have been able to adopt it and the regional rural banks (RRBs) are
now intending to explore such facilities. RRBs are scheduled commercial banks of the
Indian banking system which have been created by the Government of India with a view of
serving primarily the rural and semi-urban population with basic banking and financial
services. Their area of operation is limited to the areas as notified by the Government of
India covering only one or more districts in the states. Their ownership structure lies with the
Government of India (50%), sponsor banks (35%) and state government (15%). Since 1
April 2020 in total, there are 43 RRBs functioningin 28 states of India.
Banking agility has become indispensable to quickly sense and readily respond to the fast-
moving, volatile and competitive business environment. Agile banking firms have the ability
to understand the pivotal strategies needed to cope with unanticipated changes due to
emerging market uncertainty, growing stake holder’s expectation, accelerating pace of
modern technology, etc. Further, it is also important that firms need to continually transform
their resources, infrastructure and strategies to adapt to domestic, as well as external
changes (Prahalad, 2009). Therefore, next to strategic alignment, organizational agility is
studied as an essential business imperative which is defined as the ability to deal with and
perform well in rapidly changing environments (Sambamurthy et al., 2003;Galliers, 2007).
According to Pavlou and El Sawy (2006,2010), digital technologies usually enable different
forms of dynamic capabilities apt for turbulent environments. Based on the principle of
dynamic capability view (DCV) (
Cirjevskis, 2017), prior studies have examined both
alignment and agility as higher-order capabilities in two disparate streams of research
studies (Mao et al., 2015;Pelletier and Raymond, 2014). However, integrating these two
distinct capabilities to investigate their performance impact is very limited. Therefore, a
more detailed empirical analysis is needed to examine the direct and indirect (via agility)
effect of strategic alignment on performance. Further, due to the complex nature of the
PAGE 26 jJOURNAL OF ASIA BUSINESS STUDIES jVOL. 16 NO. 1 2022
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