Objective and main results

This study focuses on the business value of IT and explores how IT-enabled core competencies can enhance strategic flexibility of firms. Overall, the results suggest that the value of IT depends largely on improved strategic flexibility, referring to firms’ abilities to reallocate and reconfigure their organizational resources, processes, and strategies to deal with environmental changes.

IT support for core competencies is defined as the extent to which information systems are used to enhance and develop firms’ core competencies, and is closely related to development, selection, and implementation of organizational strategy. IT support for core competencies is conceptualized as a mechanism to achieve mutual coherence between IT activities and firm priorities.

Findings:

• There are positive, significant links between IT support for core competencies and strategic flexibility, and between strategic flexibility and firm performance.
• The effect of IT support for core competencies on performance is partially mediated by strategic flexibility.
• IT infrastructure positively moderates the link between IT support for core competencies and strategic flexibility.
• State-owned firms are less likely to apply IT applications to collect and analyze market information and thus surrender opportunities for achieving strategic flexibility and stronger firm performance.

Summary of practical implications

Managers should strive to channel IT support for core competencies towards important areas of the firm (such as strategic design and implementation). To achieve this, IT managers should interact closely with the business executives making strategic decisions to ensure the firm’s survival in the market environment.

Firms should focus their efforts on development of IT support for core competencies and its coordination with IT investment to maximize the return on IT investment. Managers should thus apply IT investment more efficiently and effectively to support core competencies (such as total quality management and market capability) in order to adapt to the dynamic environment. 

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