Role of Information Technology

in Global Business Environment

1 ST W E E K
BBA

NABEEL REHMAN
 Lecture Outline

Information Technology (IT)

 Dimensions of information METHODOLOGY

technology
 Population
 Information technology in
business  Sample size
 Information technology in  Sampling procedure
global business environment  Sampling unit
 Information technology and  Data collection
firm performance
 Data collection technique
 Current problems related to
information technology in  Data analysis
organizations.  Data analysis technique
 Future of information
technology in global business
 Information Technology (IT)

 Harold and Thomas (1958) argued that the

new technology doesn’t have a well
established name, and they introduce a term
first time as Information Technology (IT).
Their definition consists of three categories:
techniques for processing, the application of
statistical and mathematical methods to
decision-making, and the simulation of
higher-order thinking through computer
programs.
 Concepts of IT
IT capability is a kind of organizational ability to support organizational activities and
workflows by disposing IT resources and uniting other relevant resources (Lee et al,
2003).
IT capability is described as the abilities to integrate other resources of organizations
by using and allocating IT resources. (Bharadwaj , 2000).

IT capability is the aggregation of hardware, software, shared services, management

practices, and technical and management skills (King, 2004, Wang and Alam, 2006).

IT capability is conceptualized as the extent to which a firm is knowledgeable about and

effectively utilizes IT to manage information within the firm, including IT object, IT
knowledge, and IT operations (Tippins and Sohi , 2009).

IT capability is portrayed as having three interrelated attributes: a fusion of business

knowledge with IT knowledge, a flexible and reusable IT infrastructure, and an

effective use process (Peppard and Ward , 2004).

 History of IT in Business

 In early 80’s of last century, researchers stated the

important role of IT for firms competitive advantages
such as, (Neo, 1988, Clemons, 1986 and feeny 1990) give
the attention to IT strategic potential and IT use present a
competitive advantage for firm.
 King, Grover, and Hufnagel (1989) Analyze the IT
information resources empirically to develop the strategic
application.
 Scholars point out that firms can achieved the
competitive advantages by using the IT innovatively to
reduce the costs and increase the revenue.
 Gerstein and Reisman (1982) take first step to examine
the IT behavior and Parsons (1983) firstly published IT
framework research and stated thee different level of
impact on the strategy, firm and industry.
 History of IT in Business

 After the base work on IT in strategic management and IS

field, researchers bring attention to improve the relationship
between IT and performance of firm. In early 90’s (Grant,
1991) classified the IT based resources as, (1) tangible
resources, (2) human IT resources, and (3) IT intangible
resources.
 Clemons and Row (1991) argued that innovative firms
normally rely on the unique resources for innovative IT
applications to gain the competitive advantages.
 In compare, well documented strategic applications of IT were
present by (Clemons & Row, 1991) and (Kettinger, Grover,
Guha, & Segars, 1994). Clemons and Row (1991) argued that
innovative firms normally rely on the unique resources for
innovative IT applications to gain the competitive advantages.
Similarly (Mata et al., 1995) do effort on the basis of resource
based view.
 History of IT in Business
 Measuring the business value of IT is a complicate and
multidimensional issue, as the findings of several researches (Kohli &
Grover, 2008; Melville et al., 2004; Oh & Pinsonneault, 2007; Piccoli
& Ives, 2005).
 In the starting of new millennium (A. S. Bharadwaj, 2000) find out
that those firms perform better as compare to other that have high
level of IT capabilities and describe the IT concept as organizational
capabilities. (A. S. Bharadwaj, 2000) divided the IT resources as IT
infrastructure, human IT resources and IT enable intangibles assets.
 Moreover, a number of researchers present the evidence that IT
capabilities create opportunities and help to gain competitive
advantages (e.g., (Aral & Weill, 2007; Bhatt et al., 2005; Byrd, 2001;
Kearns & Lederer, 2004; Sambamurthy et al., 2003; Wade &
Hulland, 2004).
 Researchers have started to find out the value of information
technology application in business performance, as IT leverage
capabilities in new product development (Pavlou & El Sawy, 2006),
IT infrastructure role in firm performance (Dong. 2010), IT technical
skills role in firm performance and The strategic value of IT was
assessed conceptually and analytically by (Oh & Pinsonneault, 2007).
 History of IT in Business

 In the current era of advance technology, information technology

getting more importance for firms. Due to constantly innovation
and technology changes, competition among the firms becoming
stiffer. To meet the competition and survival in the market, it is
necessary for firm that they have fast communication, latest
information technology, and high skilled persons and well market
knowledge.
 Researcher giving their full attention to IT and examine the
relationship through direct effect and Indirect effect as, C. Chen,
Lim, and Stratopoulos (2011) examine the role of IT capabilities
sustainability on performance of firm during the time period of
economic slump and find out how sustainability of IT capabilities
contributes in the ability of firm to recover from losses.
 (Lim, Stratopoulos, & Wirjanto, 2012) integrate two streams; IT
capabilities impact on firm performance and IT executives on the
firm’s market and financial performance, finding of study shows
that effect of IT executives on firm performance is directed through
IT capabilities.
 IT Capabilities Dimensions
A firm's ability to establish a complete set of
Flexible IT technological resources, which provides the foundation
Infrastructure for the development of IT applications ( Ray, Muhanna, &
Barney, 2005)

Degree to which a firm relates its IT to other business

partners, exchange the information among partners and
IT Integration helping them to establish collective relationship and
communicate (Ray et al. 2005).

The know-how to built IT application by using the

Technical IT Skills available technology and operate to make products
(Mata, Fuerst, and Barney 1995).

IT Business The extent to which IT and business operations share

Alignment congruent goals and maintain a harmonious relationship (
Luftman and Brier, 1999)
Information Technology (IT) in Global Business

 In the competitive business environment,

information technology consider as a critical
element for firm’s success. IT uses a
considerable amount of firm financial
resources of and in the world economies
spending on IT resources reached to US $ 3.7
trillion in the year 2011, and increases nearly
8% as compared to last year 2010, and
expected more increase in upcoming years
(Pearson and Saunders, 2013).
 IT in Pakistan

 In Pakistan, IT role is ignored to promote the

performance of firm (SMEDA, 2013; Ahmed,
Shahzad, Umar, & Khilji, 2010). Firms can
gain competitive advantages by giving
priority to IT capabilities (Yan & Sengupta,
2011). IT capabilities are necessary for the
performance of manufacturing and servie
sector firms (Ghosh, Liang, Meng, & Chan,
2001).
 Research Gap

 Breznik (2012) concludes that exploring the value of IT in firm

performance still remains inadequately researched and
empirically tested.
 Literature on the effect of IT on firm performance shows the
mixed opinion by researchers.
 Several scholars state a positive and significant impact of IT on
performance of firm (Barua, Kriebel, & Mukhopadhyay, 1995;
Stratopoulos & Dehning, 2000), or describe the competitive
advantages and value added benefits achieved by using of IT
(Dutta & Evrard, 1999; Guimaraes, Martensson, Stahre, &
Igbaria, 1999).
 Other researchers argue that it is hardly significant
(Strassmann, 1990; Yosri, 1992) or even propose the negative
impact of IT on firm performance (Brynjolfsson & Hitt, 1995;
Holland & Lockett, 1997; Setzekorn, Melcher, & Rai, 1998).
 Problem

 Business competition has been increased due to globalization and

technological advancement (Berchicci, 2013). Without competitive
advantage, it is not possible for firms to compete rather increasing
performance as it is essential to grab the ultimate objective of any
business.
 The value of information technology (IT) inside organizations has
flourished over the recent decade. Because, IT capabilities are
necessary component for firm aiming to achieve the competitive
advantage (Ordanini & Rubera, 2010).
 But the performance of firms are decreasing day by day. The major
reason of decreasing performance and failure is ignoring the role of
IT capabilities to promote performance (Ahmed et al., 2010;
Shahid & Manarvi, 2014).
 Literature Review: IT Capabilities and
Firm Performance
Saraf, Langdon, Firm performance refers as, effectiveness and efficiency of a firm in
& Gosain, 2007 term of its financial performance.
Zeinalnzehad et Large corporations and SMEs both facing performance issue but
al. 2011 more prominent in SMEs.

Chorng-Shyong IT capabilities Significantly and positively influence the

(2013) performance of firm.
Ong Chen, IT capabilities are necessary for performance of manufacturing
(2014) firm that require for the sustainability of firm and effects the firm
performance

(Bharadwaj, Firms can get the better performance through combining the IT
(2000) related resources; it creates the uniqueness in IT capabilities.
Nevo and Wade, IT capabilities should be observed through different firm resource
(2010) as intermediaries.

(Ong & Chen, IT capabilities significantly effect the ROA, ROE, ROS, market
2013) share and growth of sale
 Literature Review
RESEARCHER/S Year I/V D/V Theoretical Support

Yini Lin, 2014 Firm resources Firm Performance RBV

Lei-Yu Wu
Christian Lechner and Sveinn 2014 Entrepreneurial Firm Performance -
Vidar orientation
Vassiliki , Bamiatzi 2014 Strategy Firm growth -
Tom Kirchmaier
Hefu et al. 2013 IT capabilities Firm performance Dynamic Capability
view
Endah Rahayu et al. 2013 Technology Firm Performance RBV
capabilities
Davied and Rosemarie 2013 Firm Resources Firm Performance RBV
Chorng-Shyong Ong 2013 IT Capabilities Firm Performance RBV

Ja-Shen Chen, 2012 IT capabilities Firm Performance RBV

Hung-Tai Tsou R-A

Stole and Waleed 2009 IT capabilities Firm Performance Contingency view-

Suzanne Rivard et al. 2006 IT Assets Firm Performance RBV

 METHODOLOGY

 Introduction
 Population
 Sample Size
 Sampling Technique
 Data Collection
 Data Collection Technique
 Data Analysis