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IBIMA Publishing
Communications of the IBIMA
http://www.ibimapublishing.com/journals/CIBIMA/cibima.html
Vol. 2011 (2011), Article ID 261315, 12 pages
DOI: 10.5171/2011.261315
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Factors influencing IT-Business Strategic
Alignment and Sustainable Competitive Advantage:
A Structural Equation Modelling Approach
Dmaithan Abdelkarim Almajali and Zulkhairi Md Dahalin
College of Arts & Sciences, Universiti Utara Malaysia, Malaysia
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Abstract
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Introduction
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Communications of the IBIMA 2
Huang (2005) argue that the way in which
business strategy aligns with IT strategy in
the real world still remains unanswered.
Mahmood (1993) states that strategic
managers clearly need a better
understanding of the impact of IT investment
on organizational strategic and economic
performance. This view is reiterated by many
IS researchers that IT-business alignment can
help organizations improve the positive
impact of IT on their performance (Croteau
et al., 2001; Henderson & Venkatraman,
1993). Despite a growing body of research
(Brown & Magill, 1994 ), recent scholars
(Chan & Reich, 2007; Johnson & Lederer,
2010; Raymond & Croteau, 2009) have
continuously called for further investigation
for examining the factors that affect IT-
business alignment; and the coupling
processes from alignment to enhance
sustainable competitive advantage. Indeed,
since little research has been conducted in
this area, and in an effort to respond to
several calls from well-known scholars on
this issue, we present a causal model for
quantitative testing of the impacts of six
antecedents that could lead to strategic
alignment.
The rest of this paper is organized as follows.
Next section discusses the theoretical
background of this research. Then, in line
with the research framework of this study,
propositions are developed on the direct
impact of the antecedent factors on strategic
alignment. The following sections describe
the research design, the results, and the
implications for both research and practice.
The paper ends with a number of conclusions
and recommendations.
Theoretical Background
Numerous articles have been written about
how IT affects organizational performance
(Dedrick, 2003). A major concern is how to
assess the IT- related business value and
organizational impacts. Broadly, there are
two main approaches. The first approach
examines the direct and multiple linkages
between IT investment and organizational
performance across economy, industry, and
firm. The second approach examines the
indirect linkages between IT investment and
organizational performance through
identifying important mediating factor. These
two approaches often lead to contradicting
results. Some research shows no significant
correlation whereas others indicate a
positive relationship between IT investment
and business performance (Henderson &
Venkatraman, 1993).
The challenge is not only to identify the
crucial factors that affect business
performance but also to build a credible
causal chain between IT and business
performance. Most of the MIS research has
started with IT-business alignment as an
important missing link between IT and
organizational performance (Shannak et al.,
2010).
IT-Business Strategic Alignment
Alignment of IT or IS strategy with business
strategy has been ranked as one of the most
important issues faced by business and IT
executives (Almajali & Dahalin, 2010b).
Alignment has been defined as the extent to
which the IT mission, objectives and plans
support and are supported by their business
counterparts (Reich & Benbasat, 2000).
Further, IT-business alignment concerns the
degree of correspondence of an
organization’s IT strategy and IT
infrastructure with the organization’s
strategic business objectives and
infrastructure. Since the late 1980s,
alignment has been an important concern to
the business community as it not only helps
firms realize the potential benefits from
investments in IT (Tallon et al., 2000), but
also enhances business performance through
aligning the organizational and technological
infrastructures (Croteau et al., 2001).
However, despite various types of alignment,
our main focus here is on investigating the
impact of several strategic alignment
antecedents on strategic alignment. We hope
this study will provide better insights into
3
Communications of the IBIMA
the conditions of alignment in terms of the
antecedent variables. Next section discusses
our research framework.
Sustainable Competitive Advantage
Porter’s (1985) book titled ‘Competitive
Advantage’ propelled the concept of
competitive advantage into popular business
vernacular. Porter did not articulate the
definition of the concept but explained that a
competitive advantage refers to
organizational factors that enable a firm to
outperform its competitors. As such, Porter
argued that sustaining competitive
advantage should be the central purpose of
an organization’s competitive strategy and
that value creation means attaining the
sustaining competitive advantage. As Collis
and Montgomery (1995) explained,
competitive advantage, whatever its source,
ultimately can be attributed to the ownership
of a valuable resource that enables the
company to perform activities better or more
cheaply than its Competitors. To be
sustainable, a competitive advantage should
be difficult to imitate or substitute (Barney,
1991). Boar (1994), for example, states: “In
response to ever growing worldwide
competition, the business needs to use IT to
build, sustain and extend competitive
advantage. “Most major strategic thrusts
require the crafted use of IT to succeed” (p.
16).
Research Propositions
In this section, we formulate our research
propositions based on the review of existing
literature of strategic alignment. The model
of this study comprises main effects of six
antecedents (i.e., leadership, structure and
process, service quality, value and belief, IT
managerial resource, and IT implementation
success) on strategic alignment and its effect
on sustainable competitive advantage.
Leadership
Research on strategic alignment underlines
the importance of reciprocal relationship
between business and IT executives to
facilitate synergy between business and IT.
Lederer and Mendelow (1987 )found that
business managers seldom assist IS
managers in formulating their plans. They
asserted that two-way communication
between business and IT executives is
essential if business and IT plans are to be
coordinated. Earl and Feeny (1994) found
that the CIO’s role and actions are vital to
ensure that IT is positioned for strategic
advantage. This leads to the following
proposition:
• Proposition 1: The stronger leadership
between business and IT managers, the
greater the manager’s engagement in
strategic alignment.
Structure and Process
Structures and processes are the
mechanisms through which organisational
activity takes place. Structures and processes
are concerned with how the organisation
organises for IT, including IS/IT strategy
development, delivery of IT benefits,
structures for service delivery, mechanisms
for business and IT organisation to bring
together (Peppard & Ward, 1999). Further,
inadequate or inappropriate structures and
processes can severely impinge on the
success of IT in an organisation. Traditionally
structures in relation to IT have been devised
around the concept of technology delivery
with a reactive IT organization developing
products (i.e., applications) in response to
business requests or around what it thinks
the business requires. To facilitate
IT/business integration, appropriate
structures and processes are necessary.
Therfore, we formulate the following
proposition:
Communications of the IBIMA 4
• Proposition 2: The stronger structure and
process with the business plan and IT plan,
the greater the manager’s engagement in
strategic alignment.
Service Quality
Over the last decade, the marketing and
quality literature have devoted reams to the
issue of service quality and delivery. Within
the quality movement there are the notions
of the ‘internal customer’ and ‘service level
agreements’ which are often devised to set
parameters around the expected
relationship.
The development of IT outsourcing has also
seen the development of legally enforceable
agreements specifying the level of service,
which the client can expect from the vendor.
Previously, there has been some interest in
applying the concept of service management
and quality to IT (Pitt et al, 1995; Van Dyke et
al, 1997), which can be characterized merely
as a customer–supplier exchange. However,
the traditional role of the IT organization as
the developer and maintainer of IT systems
has been usurped by a variety of factors and
its function now includes a significant service
component. IS research has tended to focus
on products rather than service and only
recently has this service aspect been
addressed. Also, the customer is the ultimate
arbiter of quality and no matter how good
the service provider feels, it is the perception
of the customer that is important in assessing
its quality. This has led to our third
proposition:
• Proposition 3: The higher level of service
quality between the business and IT
managers, the greater the manager’s
engagement in strategic alignment.
Values and Beliefs
Values and beliefs can significantly shape
how attitudes develop and hence behaviour
and practices. These beliefs are shaped
throughout one’s career based on the
experiences which one has with IT. For
instance, inadequate structures and
processes can impinge on the effective
delivery of IT services even if there are
congruent values and beliefs between the IT
organisation and the rest of the business.
Furthermore, the importance of values and
beliefs to strategic alignment was also been
acknowledged. Luftman et al., (1999) assured
that values and beliefs will improve strategic
alignment. Henderson and Venkatraman
(1999) mentioned that values and beliefs
affect the decision making ability of partners.
Hence, this research proposed the following:
• Proposition 4: The stronger values and
belief in the business plan and IT plan, the
greater the manager’s engagement in
strategic alignment.
IT Managerial Resource
This factor concerns the level of mutuality in
knowledge sharing and transfer. Chan et al.,
(2006) argued that reciprocal exchanges of
business and IT knowledge between business
and IT executives (Tallon, 2000) not only
improve shared understanding but also
promote common vision. Therefore, we
formulate the following propositions:
• Proposition 5: The higher level of IT
managerial resource between business and
IT managers, the greater the manager’s
engagement in strategic alignment.
IT Implementation Success
Successful history of IT unit gives reliability
to the IT unit and creates complimentary
perceptions of IT in top management (Chan
et al., 2006). Also, it gave essential
determinant to the involvement of business
managers in the planning process. The
assurance of top management in the IT
department for efficient and reliable services
are found to be important critical success
factors for aligning IS plans with business
plans (Luftman et al.,1999). This has led to
our sixth proposition:
5
Communications of the IBIMA
• Proposition 6: The higher level of IT
implementation success between business
and IT managers, the greater the manager’s
engagement in strategic alignment.
Strategic Alignment and Sustainable
Competitive Advantage
In this study the researcher will hypothesize
the relationship between strategic alignment
and sustainable competitive advantage. This
has led to our seventh proposition:
• Proposition 7: Firms that pursue strategic
alignment will enhance their sustainable
competitive advantage.
Research Methods
Pilot Test and Data Collection
Three Jordanian IT managers and two MIS
academic professors participated in a pilot
test. The researcher selected them based on
their experience in the industry in order to
get insightful information from the interview.
They completed the survey in the presence of
the first author. Then, they commented on
the contents, length, and overall appearance
of the questionnaire. Changes and
modifications were made to the survey.
Further, in order to ensure adequacy of
response, a cover letter accompany each
questionnaire to emphasize to respondents
the importance of their participation. The
researchers have chosen the country of
Jordan to carry out the data collection since
scholars Chan et al., (2006) called for such
research in different cultures; and as this
may open the gate to further research
opportunities. Data for this research was
obtained from IT managers of Jordanian
public shareholding firms. The research
population consists of all Jordanian banking,
insurance, services, and manufacture
companies that have a registered website,
and which engage in business and IT
activities. In the absence of any official lists,
various government databases were
reviewed; according to the Amman Stock
Exchange, and the Jordanian Securities
Depository Center, the total number of
companies stood at 200. A total of 172
managers returned the survey with high
response rate of 86 %.
Measures
We developed a field survey for IT managers.
All the research constructs were measured
using closed-end seven-point Likert-scale
items, with scales ranging from 1 = “strongly
disagree” through 4 = “neither agree nor
disagree” to 7 = “strongly agree”. Business
and IT managers leadership variable was
measured using six items which were drawn
from (Ward & Griffiths, 1996). Structure and
process mechanism was measured using six
items which were adapted from (Ward, &
Peppard 1996). Service quality variable was
measured using five items which were drawn
from Pitt et al. (1995). Values and beliefs
were measured using six items, which were
drawn from Grindley (1992). IT managerial
resource was measured using four items,
which were adapted from Nelson and
Cooprider (1996). IT implementation success
was measured using five items, which were
adapted from Sabherwal and Kirs (1994).
Strategic alignment was measured using six
items which were drawn from Pierce (2002).
Sustainable competitive advantage was
measured using six items which were drawn
from Al majali and Dahalin (2010a) and
DeVilliers (2006). All the adaptations of these
items were done to comply with the
Jordanian context and validated during the
pretest.
Data Analysis and Results
In order to examine whether the antecedents
discussed above could impact IT-business
strategic alignment in Jordanian public
shareholding firms, a number of statistical
tests were carried out. Indeed, the
relationship between six strategic alignment
antecedents and strategic alignment and
sustainable competitive advantage were
tested empirically using Structural Equation
Modeling (SEM) techniques using the AMOS
Communications of the IBIMA 6
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Analysis of the Measurement Model
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Unidimensionality
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Convergent and Discriminant Validity
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the measurement model by investigating the
shared average variance extracted (AVE) by
the latent constructs. Also, the correlations
among the research constructs could be used
to assess discriminant validity by examining
if there is any extreme large correlations
among them which imply that the model has
a problem of discriminant validity. In
addition, if the AVE for each construct
exceeds the square correlation between that
construct and any other constructs then
discriminant validity is occurred (Fronell &
Larcker, 1981). As the result shows that all
the constructs explained 50 percent or more
of the variance and ranged from 0.82 to 0.92
which met the recommendation that AVE
values should be at least 0.50 for each
construct (Bagozzi & Yi, 1988; Holmes-
Smith, 2001). However, the result shows
discriminant validity was demonstrated
since the AVE values were more than the
squared correlations for each set of
constructs. Therefore, the measures
significantly discriminate between the
constructs.
Analysis of the Structural Model
In order to test the structural model, it is
essential to investigate the statistical
significance of the standardized regression
weights (i.e., t-value) of the research
propositions at 0.10, 0.01, 0.05, and 0.005
levels; and the coefficient of determination
(Std. estim) for the research endogenous
variables as well.
Discussion and Implications
This paper contributes to the strategic
alignment literature by developing and
empirically testing a causal chain model of
alignment including the specification of six
antecedents. Table 2 in the Appendix
indicates the path coefficient and t-value of
each proposed path. Consistent with Reich
and Benbasat (2000), performing leadership
by business and IT managers found to be
positively but not strongly correlated with
strategic alignment (P1). Indeed, Reich and
Benbasat (2000) found that higher levels of
formal communication between business and
IT executives had a positive influence on
short-term alignment.
Surprisingly, although great attention was
made by several researchers regarding the
correlation between structure and process
mechanisms, there was no relationship
between the association between such
mechanisms and strategic alignment,
indicating that (P2) was not empirically
supported. In addition to structural issues,
there are also processual mechanisms such
as the involvement of business management
in IS/IT strategy formulation which can
impact the overall ownership of that strategy,
alignment of the IS/IT strategy with business
objectives, and responsibility for delivering
business benefits. Yet our results are
successed to show that firms performing
better service quality could impact strategic
alignment, showing that (P3) was
empirically supported. Luftman et al., (2006)
suggested that internet service providers
should prioritize technology acquisitions and
build appropriate infrastructures. All in all,
more research is needed to clarify and
explain the lack of support of (P2) bearing in
mind that the research field based on the
country of Jordan with different cultural
context. A possible explanation is that
Jordanian IT-managers are not aware of the
importance of exploring such mechanisms.
Thus, more research is required to
understand how firms’ structure and process
activities affect strategic alignment, and
further validate the study construct.
In line with previous studies, superior values
and beliefs affected strategic alignment.
Thus, (P4) was supported strongly. For
instance, Bashein and Markus (1997) have
introduced the concept of credibility in
relation to IT specialists. They contend that
expertise alone does not inspire trust and
credibility, concluding that the successful IT
specialists work on their trust worthiness
while at the same time build good
relationships with clients. To foster this
credibility, IT specialists must, therefore,
Communications of the IBIMA 8
believe that trustworthiness and relationship
building are necessary practices to engage in.
Largely consistent with the literature
(Basselier et al., 2003; Nelson & Cooprider,
1996), IT managerial resources in terms of
shared knowledge between business and IT
managers was found to have a positive
influence in strategic alignment. Therefore,
(P5) was supported. Proposition 6 found that
high level of IT implementation success
experience a high level of strategic
alignment. This result appears to provide
support to the arguments and findings made
by Rockart (1996) in which a successful IT
track record improves of business
relationships at all levels. Successful IT
implementation may develop the
relationship between IT and other functional
areas (Boynton et al., 1994). Reich and
Benbasat (2000) also found prior IS project
success to assist short-term alignment. Thus,
prior IS success is an important predictor of
existing levels of alignment. The past
suggestion and the credibility gaps cannot be
ignored by managers but must be addressed
as a high priority and must use new
successes to improve its track record. The
firm should facilitate the IS organization to
better align itself, as a trusted partner, with
the rest of the organization. Proposition 7 is
to say the firms that pursuing strategic
alignment has greater ability to enhance their
sustainable competitive advantage.
Therefore, (P7) was supported.
Limitations and Conclusions
There are some limitations of the study. The
first limitation is that the proposed
conceptual model is based on the cross-
sectional data from the Jordanian public
shareholding firms. Therefore, longitudinal
investigations are preferred for better
implications of the strategic alignment. In
addition, although the response rate of this
study was sufficient for the condition of
statistical analysis, the percentage of those
who did not respond was still observable. In
other words, even though the research
results could be representative, it is
reasonable to be watchful about its
generalization. Thus, to increase statistical
validity, further research should consider
higher response rates. Also, the data and
results reported in this paper were based on
a single country, Jordan, and in turn are
applicable specifically to the Jordanian
context. Thus, this raises inquiries regarding
the generalisability to other cultures and
different contexts. Consequently, further
research is needed with regard to several
countries since this would help to advance
understanding of the IT-business strategic
alignment issue and the conditions and
outcomes of achieving it from different
nationwide origins in different contexts. All
in all, although this paper investigated
several propositions and offered empirical
support for the acceptance and refusal of
some of these propositions, more
generalizations on the application of the
theoretical premises that developed in
building the research model will be needed
to enrich and to build the alignment theory.
This is to say, a more generalized research
model that compensate the current research
limitations by adding further impacting
variables to the model and obtain a more
representative sample from different sectors
will be required.
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11
Communications of the IBIMA
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Communications of the IBIMA 12
APPENDICES:
Table 1.Measurement Model Fit Indices
Table 2.Summary of Proposed Results for the Theoretical Model
Research Proposed Paths
Coefficient
Value
(Std.estim)
t
-
value
(C.R)
p
-
value
Empirical
Evidence
P1:
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P2:
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P3:
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P4:
Value and Belief
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5G
5
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P5:
IT Managerial Reso
urce
→
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C
:
P6:
IT Implementation Success
→
:
G#
5((C
WWW
:
P7: Strategic alignment
→
Sustainable competitive advantage
#C
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WWW
:
WWW+XG
Model
x²
df
P
x²/df
IFI
TLI
CFI
RMSEA
Initial
Estimation
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>5(
=
5
C>
5
C
Final
Model
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