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Organizational Mindfulness towards Digital Transformation as a Prerequisite
of Information Processing Capability to Achieve Market Agility
Associate Professor in School of Finance and Investment
Guangdong University of Finance, Guangzhou, China
Assistant Professor in Information Systems
Department of Information and Decision Sciences, Salisbury University, US
Lecturer in Business and Management
School of Strategy and Leadership, Coventry University, UK
Associate Professor in Digital Marketing
Sheffield University Management School, University of Sheffield, UK
Firms are increasingly transforming themselves into agile enterprise by integrating and
exploiting digital technologies. Prior research has suggested organization mindfulness would
help proactively manage digital technologies and reduce the possibility of rigidity resulting from
digital technologies. Although the key role of organizational mindfulness has been increasingly
recognized, the impact of organizational mindfulness towards digital transformation on
developing digital technology enabled information processing capacity (IPC) has not been
empirically examined. In this study, we conceptualize digital technology enabled IPC based on
the information processing view (IPV) and examine the relationships among organizational
mindfulness, IPC, and market agility. Empirical findings from our survey of 102 managers of US
companies indicates that digital transformation-mindful organizations are more likely to
effectively establish a digital technology infrastructure; digital technology-enabled external and
internal relationships and digital technology-business strategic alignment which, in turn,
enhances their ability to respond to environmental turbulence in the markets promptly.
Keywords: Organizational mindfulness, digital transformation, information processing view,
information processing capacity, market agility
Firms encounter intense competition, market turbulence, and ever-changing technological
innovation in a dynamic business environment. Overcoming this challenge requires firms to
transform themselves to be agile in the market by integrating and exploiting information
technology (IT). Venkatraman (1994) labels this business transformation as “information
technology (IT)-enabled business transformation” and defines it as the sequential changes where
organizations improve their operations; internally integrate through IT functionalities and then
redesign business process to transform IT capability into competitive advantage and financial
performance. As for the arrival of the age of digitalization, digital technologies such as social
media and the Internet of things, analytics and artificial intelligence (AI) have been intensively
used in contemporary businesses. Vial (2019) provides a new definition of IT-enabled business
transformation to reflect this trend. He redefines it as digital transformation (DT) that “aims to
improve an entity by triggering significant changes to its properties through combinations of
information, computing, communication, and connectivity technologies” (p. 118).
Digital transformation has been recognized as a necessary strategy in facilitating market
agility (Bharadwaj, 2000; Hess et al., 2016; Lu and Ramamurthy, 2011; Wang & Hajli, 2017).
Market agility is defined as the ability to “collect and process extensive amounts and a variety of
information to identify and anticipate external changes” and to “monitor and quickly improve
product/ service offerings to address customer needs” (Lu and Ramamurthy, 2011, p. 935). It is
acknowledged that firms embracing digital technologies are most likely to sense and react to
internal and external opportunities and threats, identify and evaluate current and potential
competitors in the business environment very quickly. In fact, an organization’s market agility
heavily relies on its ability to access information and then act on it due to the information
overload issues in the current big data era (Srinivasan & Swink, 2018; Park et al., 2017).
Information processing capacity (IPC) is defined as the ability to gather, interpret and synthesize
information in the context of organizational decision-making (Tushman and Nadler, 1978).
Digital transformation lies at the heart of this process as it has the potential to increase firms’
ability to collect, disseminate, store, analyze and display information, all of which strengthens
firms’ ability to process information (Roberts and Grover, 2012). However, there is a paucity of
research to explain how digital technologies can be deployed to develop information processing
capacity (IPC), thereby achieving superior market agility.
According to the information processing view (IPV), IPC needs to closely match the
information processing needs of the company in order to improve a firm’s performance (Moser,
Kuklinski, Srivastava, 2017; Tushman and Nadler, 1978; Wang, 2003; Winkler, Kuklinski and
Moser, 2015). However, a high-level of IPC does not happen by chance (Overby, Bharadwaj and
Sambamurthy, 2006; Swanson and Ramiller, 2004). Organizations need to adjust their digital
technology portfolios or even introduce new digital technology in order to reach the desired IPC
(Hess et al., 2016). More importantly, organization mindfulness toward digital transformation
would help proactively manage digital technologies and reduce the possibility of rigidity
resulting from digital technologies (Cram and Newell, 2016; Dernbecher and Beck, 2017;
Swanson and Ramiller, 2004).
Organizational mindfulness is defined as “the extent to which an organization captures
discriminatory detail about emerging threats and creates a capability to swiftly act in response to
these details” (Vogus and Sutcliffe, 2012, p. 723). The presence of organizational mindfulness
raises the opportunities that an organization will make digital transformation decisions and
effectively deploy their organizational resources to better implement digital technologies.
Although the key role of organizational mindfulness in digital transformation has been
increasingly recognized, the impact of organizational mindfulness towards digital transformation
on developing IPC has not been empirically examined. To fill these gaps, we aim to address the
following research questions:
RQ1: How can digital technologies be deployed to develop information processing
RQ2: Does organizational mindfulness, towards digital transformation as a prerequisite of
information processing capability, achieve market agility?
This study contributes to the organizational agility, mindfulness and IT literature. First, we
consider the enabling role of organizational mindfulness and IPC in developing a firm’s market
agility. This is, to the best of our knowledge, among the first attempts to examine the effects of
organizational mindfulness toward digital transformation, IPC, and market agility. Second, the
findings suggest firms need to be mindful about new digital technologies and pay full attention to
identify opportunities for realizing value from a digital transformation. Third, the empirical
evidence shows that digital transformation-mindful organizations are more likely to effectively
establish a digital technology infrastructure, digital technology-enabled external and internal
relationships, and digital technology-business strategic alignment, which in turn enhances their
ability to respond to environmental turbulence in the markets promptly.
The remainder of this paper is structured as follows: the next section serves as our
theoretical background, which leads to the development of the research model and associated
hypotheses; followed by our research method, findings, and discussions, contributions to
research, implications for practice and recommendations, then limitations and future research
directions are discussed as our conclusion.
2. Theoretical Background and Research Model
2.1. Market agility
In the organizational agility literature, market agility is the firm-wide ability to stay alert to
changes that occur in the dynamic business environment and quickly deploy resources to respond
creatively (Goldman et al., 1995; Dove, 2001). Market agility focuses on the reaction to market
changes at the strategic level to ensure the development of the organization, such as strategic
direction and decision-making in turbulent conditions. Market agility is comprised of two parts:
alertness and the response. Alertness refers to a firm’s ability to detect environmental changes
and notice the underlying opportunities (Dove, 2011). These often-unpredictable changes raise
the level of uncertainty and prevent firms from being able to forecast market conditions
accurately and plan their business activities accordingly. In this paper, environmental change
includes variations in the general and task environment dimensions, namely, technology, politics
and regulation, economics, international situations, suppliers, customer preference, labour market
and competitor actions (Daft and Marcic, 2012). Response relates to a firm’s ability to perform
proper activities after receiving signals from the environment. Decisions have to be made based
on the information collected and the knowledge accumulated in the organization, and then the
firms deploy or acquire resources, such as labour, finance and IT, in order to carry out those
decisions appropriately. In general circumstances these responses are not pre-designed and may
vary considerably (Sambamurthy, Bharadwaj and Grover, 2003; Van Oosterhout, Waarts and
Van Hillegersberg, 2006). Firms ideally vary their decision-making processes to match these
changes triggered by different business situations.
In a business context, agility is not the same as flexibility, which is a different concept that
is often related to a firm’s success in a turbulent environment. Flexibility has been defined as an
organization’s various managerial capabilities for dealing with a dynamic market. Firms build
flexibility by encouraging diversity in resources and management options, for example by
creating a variety of products that target different customers. This allows them to react
effectively in response to change (Grewal and Tansuhaj, 2001). Flexibility is a predesigned
feature of resource configurations in organizations. When designing an organization’s structure
and business processes, managers must embed flexibility in both the structure and processes that
will be capable of dealing with the forecasts of future changes and organizational needs.
Therefore, a firm’s flexibility tends to solve changes that are somewhat predictable, and the
response is likely programmed within the processes and the given structure of the organization
(Van Oosterhout et al., 2006).
However, not all of these changes have elements of predictability with a probable response.
Organizations often need to deal with radical changes that cannot be planned for beforehand.
This is when agility is required. In other words, agility supplements organizational flexibility by
enabling firms to quickly and easily react to changes caused by novel or unpredictable catalysts
(Overby et al., 2006; Van Oosterhout et al., 2006). The ability to rapidly implement an effective
response to unforeseen opportunities and threats is the source of sustainable competitive
advantage in most of today’s organizations, especially in turbulent business environments
(Pavlou and El Sawy, 2010).
2.2. Information processing capacity
Information processing view (IPV) emerged in the context of organizational structure
design assumes that the human cognitive limit is an inevitable constraint for any activities that
involve information (Simon, 1957). However, information is necessary for all kinds of
organizational operations, from daily routines to strategic decision-making. Thus, it is important
for organizations to cope with this limitation, which can be achieved through the design of the
organizational structure. According to IPV, two factors contribute to the human cognitive limit,
which indicates the information process requirements (IPR): uncertainty and equivocality.
Uncertainty is created by inadequate knowledge and information (Karimi et al., 2004), while
equivocality is created by the ambiguity of the information (Tushman and Nadler, 1978; Daft
and Macintosh, 1981). Within a turbulent business environment, for example, the changes in
regulations, consumer preference and demand can cause unexpected impacts on the business.
Firms need to continuously monitor the environment, notice the changes and evaluate them.
Organizational decision-making is governed by great uncertainty and equivocality (Melville and
Ramirez, 2008). As uncertainty and equivocality increase, organizations must alter their task
completion processes because of the various unforeseen changes and misunderstandings.
Managers need to constantly seek additional information or resources or devote extra time and
effort to clarify the situation, both of which increase the number of activities related to
information processing (Tushman and Nadler, 1978; Daft and Macintosh, 1981). Thus,
organizations need to develop strong IPC to address the high IPR generated by the turbulent
According to the IPV, an organization can be considered as an imperfect information
processing system because of its inevitably incomplete information and limited IPC (Galbraith,
1974). Incomplete information, largely due to limited IPC, results in poor decision-making and a
firm’s performance. Because of this, organizations are continuously developing strategies and
refining their organizational structures to increase their ability to gather complete information
and improve performance (Kohli and Grover, 2008). High IPC indicates an ability to collect and
process external and internal signals and thus provide timely alerts to managers (Wang, 2003;
Premkumar et al., 2005). With sufficient information, managers can quickly recognize the
importance of these signals from both internal and external environments and take prompt and
appropriate action (Park et al., 2017).
IPC consists of two components: IPR reduction and information processing. IPR reduction
refers to a firm’s design processes to reduce the uncertainty and equivocality in the information
by reducing the amount of irrelevant information included and the vagueness of the information.
Information processing relates to a firm’s ability to act on the information collected, including
the collection, organization, and exploitation of the information, as well as its use to support
business operations. Organizations that possess a high level of IPC monitor the environment
better and are more sensitive to market changes and events.
IPC has been applied in various research streams, such as the design of organizational
structures and control mechanisms (Shockley, Roth and Fredendall, 2011), and IT adoption
(Gattiker and Goodhue, 2004; Premkumar et al., 2005). IT applications, such as resource
planning systems, can link various stakeholders in an organization; more closely and effectively
increase the accuracy, reliability, and timeliness of the information needed for tasks such as
forecasting and planning (Banker et al., 2006). For example, Banker and colleagues (2006) found
that higher IT capacity is associated with higher production flexibility and agility in
manufacturing plants. However, Pavlou and El Sawy (2010) found firms with high IT leveraging
capabilities are more likely to be agile in new product development and are able to move into
new competitive positions in a very short period when facing discontinuities in the environment.
These studies illustrate the role of IT capability in providing relevant information when agility is
needed by the adopting organization (Chen et al., 2014). Recently, the adoption of digital
technology has been considered as a means for improving firms’ IPC. For example, the adoption
of Web 2.0 and big data analytics tools improves the information dissemination, increases the
information source, and enhances the utilization of different types of data (Irani et al., 2017;
Wang, Kung, and Byrd, 2018). However, notwithstanding the considerable research in IPC, there
has been little attention given to improving our understanding of the impact of IPC on
organizational performance, particularly in market agility.
IPC is reflected by the external and internal relationships and digital technology resources
within an organization. These lateral relationships and resources not only create additional
information exchanging, which improves the richness of the information and knowledge
creation, but also reduce the equivocality in the information, which lowers the IPR and improves
information processing. Meanwhile, digital technology determines the way organizations collect,
store, analyze, and disseminate the information (Wang and Byrd, 2017). Digital technology also
shapes the way of communication and collaboration among different individuals and parties
within and across firms. Research has found that information sharing and dissemination made
possible by digital technology could reduce the uncertainty (Premkumar et al., 2005). In this
study, therefore, we conceptualize the information processing capacity of an organization as a
multidimensional construct (Hilbert, López, and Vásquez, 2010) and justify the inclusion of key
components of IPC based on the IT business value generation framework (Melville, Kraemer and
Gurbaxani, 2004). Melville et al.’s (2004) argue that business value of IT can be intensified by
the bundling of internal IT resources (e.g., technology IT resources and human IT resources), the
synthesis and integration of business processes and IT resources, and external resources and
relationships (e.g., trading partner resources), and industry and country characteristics. Following
this logic of thought, IPC is comprised of four components: digital technology infrastructure
management, digital technology-enabled external relationship management, digital technology-
internal relationship management, and digital technology-business strategic alignment.
Digital technology-enabled external relationship management refers to the ability to manage
inter-organizational relationships between a firm and its external stakeholders such as customers,
suppliers, and partner firms to deliver high value IT applications. Digital technology-business
strategic alignment refers to the creation of a shared vision between digital technology and
business strategies and activities in the firm. Digital technology-enabled internal relationship
management represents the ability to cultivate effective internal partnerships between digital
technology’s providers and digital technology’s users in an organization to promote positive
interaction and rich dialogue among the parties to deliver desired digital technologies. Digital
technology infrastructure management represents the ability to establish and maintain a flexible
digital technology infrastructure that supports the current business and provides an agile
foundation for business modifications in support of dynamic firm strategies. We posit that digital
technology enabled information processing capacities can not only reduce the equivocality in the
information but also shorten the information processing time by reducing unnecessary
information flow within the organization.
2.3. Organizational mindfulness toward digital transformation as a prerequisite of IPC
Organizational mindfulness includes activities such as routine checking and evaluating
potential threats and opportunities, identifying reliable options for response, and acknowledging
the existence of the error. It is necessary when organizations face great turbulence in the
business environment. Research has found that organizational mindfulness is related to better
market innovation (Ray, Baker, and Plowman, 2011; Vogus and Welbourne, 2003) and better
operation performance (Madsen et al., 2006).
When it comes to digital technology, the speed and variety of technological innovation are
high; new hardware, software, and applications emerge frequently, and their impact on business
is not always predictable. Therefore, in order to fully take advantage of digital technology in
leveraging organizations’ performance, organizational mindfulness towards digital
transformation is necessary. In the context of digital transformation, organizational mindfulness
represents the activities of actively searching opportunities of digital transformation, anticipating
and evaluating the business transformation, providing alternatives for decision-making, and
deferring to IT experts when making decisions. The key aspects of this dimension include the
anticipation of digital technology change by using the firm’s superior market intelligence to stay
alert to future technology changes (Swanson and Wang, 2005), the firm’s strategic plan of digital
technology emphasizes change, for example, choosing platforms (including hardware, network,
and software standards) that can accommodate technology change, and informing management
about valuable option before a strategic change decision of digital transformation is made.
We elaborate on the research model presented in Figure 1, which illustrates how IPC
enhances market agility and how organizational mindfulness towards digital transformation can
help firms develop their IPC.
Fig. 1. Research model
3. Hypothesis Development
3.1. Digital technology enabled market agility
Research has demonstrated that incorporating digital technology into firms’ operations
enhances their market agility for competitive advantage (Sambamurthy et al., 2003). Digital
technology can increase a firm’s speed and effectiveness with which it can generate relevant
market intelligence concerning emerging opportunities or changes in the competitive
environment, disseminating such intelligence across departments and responding with speed to
the learning outcome from the firm’s intelligence (Bharadwaj, 2000). Integrating digital
technology with business processes and networks enables firms to stay alert proactively to the
market and obtain critical information ahead of competitors (Zaheer and Zaheer, 1997;
Mathiassen and Pries-Heje, 2006). The deployment of appropriate digital technology can
enhance corporate analysis, communication, and capability development. In order to achieve
digital technology enabled market agility, firms need to possess the ability to act quickly and
provide fast delivery of digital technology solutions in response to changes in market conditions
(Feeny and Willcocks, 1998). This includes collecting and acting on information about the
influence of customers, technology, competitors, users, and other environmental forces ― all of
Information Processing Capacity
which relate to the IPC of the organization. Therefore, this research argues that the realization of
digital technology enabled market agility is influenced by firms’ IPC.
3.2. The effect of IPC on market agility
3.2.1. Digital technology-enabled external relationship management
Digital technology-enabled external relationship management allows the development of
customer-oriented applications and builds durable customer relationships in the business process
(Bharadwaj, 2000). The relationships with partners aim to leverage the digital technology
capabilities of the firm’s partners to the ultimate benefit of both. Entrepreneurial digital
technology collaborations with external partners also ensures the development of appropriate IT
systems and infrastructure among all the participating firms (Feeny and Willcocks, 1998) and
encourages longer-term relationships that deliver higher-value returns. Furthermore, digital
technology enabled external relationship management can generate outsourcing solutions that
meet business, and IT needs by effectively managing externally supplied services provided
through outsourcing (Benjamin and Levinson, 1993).
Digital technology-enabled external relationship management affects the level of
information exchange among different parties. As inter-organizational relationships become
stronger, firms develop tighter bonds with their external stakeholders. This implies the formation
of lateral relationships and improves the feedback from different parties, bringing different views
together. Digital technology-enabled external relationship management also creates a highly
connected IT network that facilitates sophisticated interactions with suppliers and customers and
fosters sharing of knowledge and customer information (Bradley et al., 2012; Zaheer and
Venkatraman, 1994). Thus, firms that have a high ability to harness these external relationships
obtain timely and comprehensive information sharing through effective IT resources. This has
been suggested as an important facilitator for fast and efficient decision-making, which allows
firms to respond to the dynamic environment rapidly (Mani, Barua and Whinston, 2010). Thus,
H1: Digital technology-enabled external relationship management has a positive effect on
3.2.2. Digital technology-business strategic alignment
Digital technology-business strategic alignment enables firms to develop a proper strategic
alignment between a firm’s IT experts and business managers (Clemons and Row, 1991) and
ensures that digital technology could contribute to business value within the firm’s strategic
framework (i.e., IT-business strategic vision) (Bharadwaj, Sambamurthy and Zmud, 2002). A
well-developed strategic alignment allows IT and business managers regularly consulting with
each other on decision-making and possessing a mutual understanding of IT and business
responsibilities (Feeny and Willcocks, 1998; Ross, Beath, and Goodhue, 1996). Through IT and
business integration, partnership and synergy between IT and business managers is created,
which improves the effectiveness of IT-business joint decision-making and IT implementation
(Lu and Ramamurthy, 2011).
Greater digital technology-business strategic alignment is associated with higher IPC of the
organization for a few reasons. First, involving both IT managers and business managers in a
firm’s top management team can reduce unnecessary information flows by creating a lateral
relationship between IT managers and other top managers. Such lateral relationships increase the
speed in processing digital technology related information, thus increasing the efficiency and
effectiveness of decision-making. Second, the collaboration between IT and business managers
encourages frequent contact, teamwork and other formats of a lateral relationship process, which
facilitates greater exchange of information and knowledge. According to IPV, this exchange
reduces the uncertainty in information processing and allows for the rapid development and the
implementation of digital technology resources to address both opportunities and threats (Mani et
al., 2010). Third, a high level of participation and interaction between IT experts and managers
increases the accuracy of information interpretation, which reduces the level of equivocality in
information processing (Srinivasan and Swink, 2018). Furthermore, a clear vision and open
discussion about the strategic role of digital technology (i.e. IT-business strategic vision)
facilitates mutual understanding between IT and business managers, such as each party’s
responsibility for implementation of digital technology in the firm. Close collaborations between
managers and IT experts increases the trust between IT and other business departments, all of
which reduces the cognitive conflict in processing IT-related information. Therefore, we argue
that digital technology-business strategic alignment is an important part of creating high - value
IPC that can address the IPR of the organization. This argument is consistent with previous
research, which has shown that a well-established business partnership provides smoother
decision-making and more effective implementation of digital technology, especially when
radical changes in business are required in turbulent markets (Mani et al., 2010) and early
environmental diagnosis. Therefore, we posit:
H2: Digital technology-business strategic alignment has a positive effect on market agility.
3.2.3. Digital technology-enabled internal relationship management and digital technology
An important characteristic of digital technology-enabled internal relationship is the ability
of IT providers to understand the overall business terminology, goals, processes, and concerns to
help digital technology’s users explore new ways that the application portfolio of digital
technology can effectively be applied to support and enhance business functions (Feeny and
Willcocks, 1998; Ross et al., 1996). A high level of understanding and support for digital
technology’s users by digital technology’s providers can increase respect and cooperation and
reduce conflicts and misunderstandings between them (Feeny and Willcocks, 1998). Other facets
include the blending of business and technology expertise through the use of multi-disciplinary
teams (Schlosser et al., 2015), and users of digital technology sharing digital technology project
risk and responsibility with digital technology’s providers by sponsoring and supporting digital
Building strong internal relationships between digital technology’s users and digital
technology’s providers increases the IPC by helping to bridge the gaps that tend to exist between
digital technology and functional areas. An enhanced collaboration not only reduces cognitive
conflicts but also enhances lateral relationships. Such activities improve communication and trust
among users and providers, which leads to better decision-making that ensures performance
advantage, such as developing innovative and strategic applications (Wade and Hulland, 2004).
The impact of digital technology-enabled user management on market agility can be
identified by its effect on digital technology infrastructure management. It has been suggested
the impact of operational level performance on enterprise level performance can be identified
through middle level contributions. User management is an operational level action, and market
agility is a strategic level firm performance. Therefore, the contribution of this lower level digital
technology management activity on market agility is likely to proceed via an intermediate level
impact, in this case, digital technology infrastructure management.
Digital technology infrastructure management focuses on harnessing the infrastructure
effectively to secure the firm’s information (Marchand, Kettinger, and Rollins, 2000), ensuring
superior storage and transmission, data processing capacity, and response times (Chen, Chiang,
and Storey, 2012), and enabling a superior overall technology that is both appropriate for the
business and reasonably consistent across the firm (Ross et al., 1996). Additional aspects of this
dimension include the formulation of policies that can provide the proper integration and
flexibility of digital technology services throughout the organization (Ross et al., 1996). All of
these features facilitate decision-making by improving information collection and storage, as
well as communication among different parties. Thus, the organization’s IPC is increased.
Digital technology infrastructure management could be manifested as increasing
collaboration between users and digital technology specialists. It has been suggested that a
shared understanding among users and providers affects the selection of digital technology
(Endsley, 2012). By closely working with each other, digital technology providers gain better
insight into business needs that enable them to develop more appropriate infrastructure to deliver
the desired digital technology services and formulate policies that establish the flexibility needed
to anticipate future demands. With digital technology infrastructure management, firms are able
to quickly reconfigure or implement the new digital technology resources they need to deal with
unexpected changes more easily. Hence, we present the following:
H3: Digital technology-enabled internal relationship management has a positive effect on
digital technology infrastructure management.
H4: Digital technology infrastructure management has a positive effect on market agility.
3.2.4. Organizational mindfulness towards digital transformation and IPC
Through anticipating, planning, and managing technology change, organizational
mindfulness towards digital transformation influences the relationships between those
responsible for digital technology and the other functional areas of the firm (McAvoy, Nagle and
Sammon, 2013; Zha et al., 2015). In order to be mindful about digital technology applications,
digital technology experts need to evaluate the potential benefit and impact they can bring to the
organization and work with other managers in order to form accurate assessments of what is
expected of them. Organizational mindfulness towards digital transformation also includes the
restructuring of the business and/or digital technology work processes to accommodate and allow
for needed changes or to take advantage of strategic opportunities (Lu and Ramamurthy, 2011).
It encourages rich communications between business and digital technology. Thus, the
relationship between digital technology and business should be increased by mindfulness
activities. Thus, we argue:
H5: Organizational mindfulness towards digital transformation has a positive effect on
digital technology-business strategic alignment
Firms with organizational mindfulness towards digital transformation are most likely to
seek new digital technologies or exploit current ones constantly in order to optimize the
utilization of digital technology. These activities enhance the outreach of a firm’s external
networks, such as partners and customers. It has been suggested that transformation through
digital technologies is diffused through different individuals or organizations (Hess et al., 2016;
Singh and Hess, 2017). Therefore, it is important for a firm to build connections with external
stakeholders, such as direct contacts or liaisons, in order to keep up with the development of
digital transformation. These activities not only enhance the relationships between a firm and its
external stakeholders but also seeking and exploiting activities provides more opportunities for
inter-organizational collaboration. Therefore, we can propose:
H6: Organizational mindfulness towards digital transformation has a positive effect on
digital technology-external relationship management.
Organizational mindfulness towards digital transformation implies a firm control change
based on new digital technology opportunities and experimentation with new digital technology
advances (Swanson and Ramiller, 2004). An open culture of searching for new digital
technology opportunities prompts a close collaboration of digital technology providers and users
to leverage the utilization of digital technology and exploration of new potential benefits from
the firm’s investment in digital technology. In such an environment, users are more familiar with
digital technology, and digital technology specialists have a better sense of business needs. In
this way, firms are supported by proper digital technology for sensing and collecting data from
the changing environment. Thus, organizational mindfulness towards digital transformation
facilitates the build-up of connections between digital technology providers and users. Hence, we
H7: Organizational mindfulness towards digital transformation will improve digital
technology-enabled internal relationship management.
4. Research Method
4.1. Instrument Development
This study utilized a new, multidimensional instrument to measure each construct in the
research model, as there is not an existing scale for a multidimensional IPC. It was, therefore
necessary for the pre-test and pilot test to be conducted appropriately to ensure proper
development and refinement of the instrument. After the items were generated, they were
subjected to an assessment of content validity. Ph.D. students in the management department of a
large south eastern US university were chosen as appropriate candidates for the pre-test.
Following relatively minor revisions to the instrument resulting from the pre-test feedback
received, a pilot test was conducted to further assess and revise the instrument. Because of the
increased difficulty and expense in obtaining CIO survey responses at the time of this study, the
pilot test involved appropriate surrogates for IT senior executives. The use of appropriate
surrogates for such testing is an accepted practice in the literature (e.g., Anderson and Gerbing,
1991), especially when it is not desirable to use a portion of an already limited response
population, as was the case with this study. Thus, professional IT consultants employed by a
well-known international consulting firm were asked to answer the questions in the survey. The
data gathered through the pilot test was very useful in guiding the further refinement of the
instrument. In addition, the data gathered from the pilot-test was used to conduct preliminary
principle components analysis to provide additional guidance in evaluating and refining the
instrument. Based on the results of the pre-test, pilot-test, and CIO interviews, 20 items were
identified for the six constructs.
4.2. Data Collection
The goal of this empirical study was to empirically examine the links between the
organizations’ IPC, organizational mindfulness towards digital transformation and market agility
of the firm. To accomplish this, a cross-sectional field survey involving a mix of medium-to-
large, publicly-held companies was employed to gather data for use with the independent
variables. When considering the generalizability of the results of this research, it makes sense to
center the study on larger firms that are more likely to possess both the capability and the need to
form high IPC, and as a result, are more likely to benefit from the findings of this study.
Therefore, this study targeted medium-to-large firms. In addition, past literature has shown that
the most senior IT executive (e.g., CIO, CTO, vice president of IT, director of IT) represents the
most accurate source of information regarding digital technology in an organizational setting
(Segars & Grover, 1998). This study focused on gathering the survey data from the most senior
IT executive at each of the publicly held corporations selected for the study.
Standard & Poor’s Compustat database was chosen as the source of the companies that
would comprise the sample frame of this study. All organizations within the Compustat database
are publicly owned corporations, so the criteria of only including publicly owned corporations in
the sample frame of this study was accomplished by default. Three criteria were used to screen
(i) Companies that are registered as US corporations;
(ii) Companies that listed the US as their primary physical location; and
(iii) Companies with net sales greater than or equal to US$500 million (i.e., one-half
billion) and also less than or equal to US$10 billion (i.e., 0.5 billion ≤ Net Sales ≤ 10
A total of 1655 corporations listed in the database meet these three criteria. The list of Top
Computer Executives compiled by Applied Computer Research was used to identify the contact
information for the most senior IT executive in each of the firms in the sample frame; 1303 of
the original 1655 corporations had confirmed matches and were retained in the sample frame.
Two options were provided for participants to complete the survey in the mailout: a paper-based
questionnaire and a web link to a computer-based questionnaire on the study website. After
accounting for returned and undeliverable mail, 811 surveys were effectively mailed out. A total
of 102 responses were received via both the regular mail and the Web-based survey for an
effective response rate of 12.58%, which is considered acceptable for survey research involving
senior IT executives.
5. Data Analysis and Results
The methodology concerning the data analyses used in this study began with the appropriate
procedures for data preparation and screening. The 102 responses collected during the field-
testing phase of this study were screened for missing data, outliers, departures from normality,
and other appropriate checks for problems or anomalies within the data. The missing data was
checked first, and then Mahalanobis’ distance was used to check for outliers. Inspection of
bivariate correlations and scatterplots helped identify other data characteristics such as the degree
of multicollinearity and linearity in their relations to one another. The results of this screening
revealed no major problems with the data, thus confirming 102 usable responses. As desired, the
set of respondents represented the most senior information technology executives within the
firms represented. A breakdown of the various titles and other basic demographics of the
respondents are presented in Table 1.
Table 1. Demographics of Respondents
Chief Information Officer (CIO)
Senior Vice President
Director, or Manager
1 to 5 years
6 to 10 years
11 to 15 years
Energy and Utilities
Food Processing and Services
To assess non-response bias, we compared respondent and non-respondent firms using a
variety of data gathered from the Compustat database (e.g., sales, operating income, net income,
number of employees). Analysis of variance techniques and t-tests were both employed for
testing these comparisons. No significant differences were found relative to any of these key
comparisons, suggesting that the non-response bias was not a factor in the sample. In addition,
similar comparisons were conducted among those participants who responded online using the
web-based survey versus those who responded by regular mail using the paper-based survey. The
results of these comparisons indicated the two groups were statistically similar on all key
demographic and study variables. Thus, non-response bias, response bias, and the method of
response were not found to provide any statistically significant bias within the sample.
As all the measures used five-point Likert scales and responses were from a single
informant of an organisation, the potential threat of common method bias (CMB) was assessed
by following the suggestions of Podsakoff, MacKenzie, Lee, & Podsakoff (2003) and Bagozzi,
Yi and Phillips (1991). First, Harman's single factor test was conducted (Podsakoffet al., 2003).
The result showed that six distinct factors with eigenvalues greater than one explain 76.910% of
the total variance and the amount of variance explained by the first factor is only 15.569%,
which is not the majority of the total variance. Second, we compared correlations among the
constructs (see Table 2). The results revealed no constructs with correlations over 0.7, whereas
evidence of CMB ought to have brought about significantly higher correlations (r < 0.90)
(Bagozzi, Yi and Phillips, 1991). Consequently, these tests indicate CMB is not a threat to this
Table 2. Descriptive Statistics and Correlation Coefficients
Market agility (Q6)
5.1.Measurement model analysis
As stated above, the pre-test, pilot-test, and interviews with CIOs resulted in a final survey
instrument totalling 20 items. These 20 questions were allocated across six separate factors. First,
factorial validity was assessed with an Exploratory Factor Analysis (EFA), which for this study
was implemented using a Principal Components Analysis (PCA) (Gefen & Straub, 2005). Hair,
Black, Babin, and Anderson (2009) offer as a rule of thumb that a measurement item loads
highly if the loading is above 0.60 and does not load highly if the coefficient is below 0.40. On
this basis, all items with cross-loadings above 0.50 were retained in the model. The results of the
PCA analysis are shown in Table 3. None of these items is outside the guidelines discussed
previously. Thus, all 20 items should be retained in the model.
Table 3. Results of Exploratory Factor Analysis
A confirmatory factor analysis (CFA) with the use of PLS was performed to test convergent
and discriminant validity. The factor loadings and Average Variance Extracted (AVE) are
presented in Table 4. The results indicate that each of the expected factor structures was
obtained. In addition, the item-total correlations for the six constructs were examined in order to
provide further evidence of discriminant and convergent validity in the measurement model. The
results of the analysis of item-total correlations are presented in Table 5.
Moreover, the unidimensionality in the six constructs was also examined for discriminant
validity among the factors. A chi-square difference test was used to evaluate two nested models
within AMOS. The results of the nested model comparisons for the measurement model found
the chi-square difference test was significant (p = 0.000, alpha = 0.05). This result implies that
all six factors are needed in the model, and each factor is indeed different from the others.
Table 4. Results of Reliability and Validity
Note: 1. All of the 20 item loadings for all six constructs were significant at p < .001
2. The lowest acceptable value for AVE was 0.50 (Fornell & Larcker, 1981).
Table 5. Correlations of Items to Constructs
** Correlation is significant at the 0.01 level 1-tailed.
* Correlation is significant at the 0.05 level 1-tailed.
The reliability of the measurement model was investigated using Fornell and Larcker’s
(1981) measure of composite reliability. The results are included in Table 4. A reliability score
of 0.70 or above is deemed an acceptable value for internal consistency for exploratory research.
Thus, all of the constructs of the measurement model exhibited acceptable levels of reliability.
Considering the overall results of these tests for factorial validity and reliability, the collective
evidence suggests the six latent constructs of the measurement model all possess good
measurement properties. Subsequent analysis of the full structural model was performed with
5.2. Structural model analysis
The results of the full structural model analysis are shown in Figure 2. These results include
the structural path loading between the six constructs and the R-square value for each construct.
Because the PLS method does not provide significance tests as a part of the general estimation
procedure, the PLS bootstrapping technique was used to assess the significance as denoted by t-
values in the PLS output. This approach is consistent with recommendations and usage in
previous studies published in information systems journals (e.g., Ravichandran and Rai, 2000).
The structural model measurement results indicate seven significant positive relationships
among the six factors, confirming that organizational mindfulness towards digital transformation
does indeed appear to have a positive influence on the relationships between digital technology
and business, external stakeholders, and users. The relationships between digital technology and
business and external stakeholders have a direct impact on market agility. Furthermore, these
results support our contention that the relationship between digital technology and users will
impact market agility via its influence on the performance of digital technology infrastructure
management. Thus, all seven of the hypotheses are supported by these results. These findings are
discussed in the next section.
Fig. 2. The structural model results
Note: all path loadings are significant.
The current study uses an information processing view to develop a multidimensional
information processing capacity and empirically test how it can affect market agility and identify
its prerequisite, which is mindfulness towards digital transformation. Seven hypotheses were
proposed, and all of which were supported by the empirical data collected for the study. Overall,
our results indicate that the mindful organizations are more likely to anticipate, plan, manage
changes on digital technology, and develop a better digital technology infrastructure and
relationships between digital technology and other business stakeholders, which in turn enhances
their ability to respond to environmental turbulences in the markets promptly.
The significant positive relationship between organizational mindfulness towards digital
transformation and digital technology-business strategic alignment demonstrates that activities
such as actively anticipating, planning, and managing changes on digital technology can lead to
the development of relationships between digital technology and other business functional areas.
For example, such activities provide rich opportunities for digital technology and business
managers to work closely together, which increases the mutual understanding between digital
technology and business managers and thus reduces the equivocality in the information process.
According to previous research, mutual understanding is necessary to build business-IT strategic
alignment (Gregory et al., 2018; Huang et al., 2012; Newkirk, Lederer, & Johnson, 2008).
Therefore, this result could also be interpreted as suggesting that digital technology needs to be
carefully planned in order to achieve the optimum alignment between technology and business
(Newkirk et al., 2008).
Our finding indicates that organizational mindfulness towards digital transformation is an
enabling factor for a firm’s connections with its external stakeholders. Managing digital
transformation proactively consists of continuously pursuing new external digital technology
opportunities. Such activity stimulates contacts and collaborations between firms and external
stakeholders beyond regular business transactions. This finding is in line with Hinings,
Gegenhuber and Greenwood’s (2018) suggestions that a well-maintained relationship with
external stakeholders depends on constant contact and partnership in the context of digital
We also provide evidence that organizational mindfulness towards digital transformation
leads to improve digital technology-enabled internal relationship management. The mindful
organizations are able to develop a sound plan for changes in digital technology because they
encourage providers and users to work together to take advantage of the current resources or
explore new investments in order to identify the desired solution. This creates an open culture
that prompts collaboration between IT experts and users, which increases the mutual
understanding between the two parties (Hatzakis et al., 2005). By enhancing partnership, internal
relationship management can be improved.
The support for these three hypotheses provides strong overall validation that organizational
mindfulness towards digital transformation does indeed increase the firm’s IPC. Organizational
mindfulness towards digital transformation facilitates the development of lateral relationships
among digital technology, business, external stakeholders and users. As these connections
develop, communication, trust, and information sharing are heightened (Hatzakis et al., 2005).
Previous IPV research has pointed out the importance of communication as a way to process
information and reduce uncertainty and equivocality (Wang, 2003). It has also noted that trust
may also be attributable to higher IPC by reducing cognitive conflicts. Thus, our findings
provide further support for these arguments.
These results also reveal that a well-established relationship between IT and businesses can
strengthens market agility. Strong digital technology-business strategic alignment tightens the
connection between IT and other functional areas. Strategic alignment and shared vision reduce
the equivocality in the decision-making process, which in turn improves a firm’s effectiveness in
responding to environmental changes. Effective digital technology-enabled external relationship
management also enhances a firm’s outreach network. With such networks, organizations are
able to maintain a close relationship with their external stakeholders, which leverages both
information sharing and communication (Pavlou and El Sawy, 2010). All these activities
improve effectiveness in processing information and reduce the IPR generated by uncertainty
and equivocality that is all too common when working with external organizations. Therefore,
the advantages gained through the close collaborations that result from this reduction of
uncertainty and equivocality allow firms to address the changes that occur almost constantly in
our present business environment with their combined digital technology resources. In our
study, this was also shown to increase digital technology-enabled market agility.
Another interesting finding in this research is the effect of digital technology-enabled
internal relationship management on market agility. A close relationship between IT experts and
users increases the level of communication between the two groups, resulting in better design
and development in digital technology infrastructure. Advanced infrastructure management
could allow firms to implement organizational changes quickly and deliver desired services more
effectively. This result validates previous researchers’ findings that sound communication
between IT personnel and end-users can improve the flexibility of a firm’s digital technology
infrastructure. Our results suggest that this also leads to an improvement in the firm’s market
6.1. Theoretical Implications
This research advances the theory of IPV by deploying the digital technology resources in
forming IPC. It has been suggested that IPV is one of the most significant contributions to the
contingency literature in recent years (Galbraith, 1974; Wang, 2003; Premkumar et al., 2005).
Unlike most IPV research, which focuses on IT adoption and organizational structure design
(Premkumar et al., 2005; Melville and Ramirez, 2008), this study focused instead on the
development and enhancement of lateral relationships and their relationship with digital
technology management. Although it has been widely believed that lateral relationships that exist
alongside the regular organizational structure tend to improve a firm’s IPC and results in better
performance, few empirical studies have been conducted to examine this assumption. Most of
the current IPV studies focus on understanding the relationship between technology and IPC
(Melville and Ramirez, 2008; Wu et al., 2013). These studies are generally based on an
important assumption that the value of technology is already realized by the firm. Little has been
done to examine the role of a firm’s digital technology capability in IPC, which is necessary to
realize the value of technology. This study addresses this lack by proposing that digital
technologies can be considered as a form of IPC that includes both IT implementation and digital
technology related lateral relationship management and arguing that by improving its digital
technology capability, a firm will gain a higher IPC and thus improve its ability to address the
IPR generated by the turbulent business environment, thus leading to better organizational
Second, this research extends the research on market agility from RBV to IPV and suggests
it is equally important to consider market agility as a result of high IPC. We contend that market
agility is an information-intensive activity and should thus be analyzed via IPV in addition to
RBV. In order to do so, we analyzed the relationship between organizational mindfulness
towards digital transformation, IPC and market agility based on IPV, and empirically validated
the argument. Our findings revealed that mindfully anticipating, planning and managing changes
in the functions of digital technology as an antecedent of a firm’s IPC by creating digital
technology related lateral relationships. Its impact on market agility is thus realized via its
influence on IPC. This result addresses the research argument that the mindful management of
digital technology is necessary in order to support organizational information processing
capability (Swanson and Ramiller, 2004). These results also confirm that business value of
digital technology does indeed extend beyond its use as a tool to support the operational process;
it also functions as a part of the business for various business capabilities (Kohli and Grover,
6.2. Practical Implication
Besides its contributions to academic research in this area, this study highlights a number of
interesting implications for practitioners. First, the use of IPV in analyzing market agility reveals
a new way to look at the value of information to a firm. With the development of emerging
technologies such as big data analytics and AI, firms are faced with assimilating large amounts
of information coming from a wide variety of sources (Wang et al., 2019; Wang et al., 2018).
The challenge is to reduce unnecessary information processing, which leads to uncertainty and
equivocality, as this influence not only effectiveness but also the efficiency of an organization’s
reaction toward the environment. Managers interested in developing market agility should focus
on reducing the impact of uncertainty and equivocality in business processes through better use
of their digital technology resources and developing lateral relationships within their
organizations, especially those involving IT personnel.
Specifically, this research emphasizes the importance of information processing capacity in
creating digital technology enabled market agility. Better relationships between digital
technology specialists and executives can improve the firm’s digital technology related decision-
making at a strategic level, such as the adoption of certain digital technology enterprise
applications or the strategic role of digital technology. The relationship between digital
technology experts and users improves decision-making at an operational level, such as digital
technology’s function and structure design. We recommend that firms create more opportunities
to encourage their digital technology experts to work with other employees, for instance via
shared project responsibility. The advantage here is obvious; digital technology experts develop
better insights into business needs and are thus able to deliver the required digital technology
services with the development of appropriate digital technology infrastructure and applications.
One thing leads to another; improved flexible digital technology infrastructure management
allows firms to accommodate changes in digital technology resources more easily, thus enabling
them to respond to market changes more quickly
Furthermore, firms need to acknowledge the importance of reaching out to external
stakeholders in promoting digital technology-enabled market agility. Networking is an important
source of obtaining information. Information is transferred through different nodes in the
network. Firms should leverage their connections with external shareholders through various
activities, such as shared digital technology resource creation and joint digital technology
development. These activities ensure good communication and flexible connections between the
firm and its external stakeholders; this could allow firms to obtain information more quickly and
7. Limitation and Conclusions
As with all studies designed to develop and assess digital technology-based metrics and
models, this research has endeavored to bring a theoretical and operational perspective to a rather
complex concept. Undertakings such as this are ambitious in nature and therefore inevitably
suffer from some inherent limitations. One potential limitation of the present study is the range
of indicators used to reflect each of the constructs in the research model. Several studies have
concluded that no psychometric technique can adequately address the ultimate breadth or
completeness of a measure (e.g., Segars & Grover, 1998). Although the research design of this
study incorporated multiple rounds of theory building through a comprehensive literature review,
expert opinion, pre-testing, and pilot-testing, it is certainly possible that other dimensions of IPC
exist but are not included within the current conceptualization and models.
Another potential limitation is the use of a single key informant for the collection of data
involving each of the independent variables in this study. The data collected represents the views
of senior IT executives, who are likely to provide valid representations of the digital technology
activities and related initiatives in their organizations. While the key informant method is typical
of IS research, it is by no means an ideal approach. Future research could adopt methods
involving multiple informants and structured approaches for triangulation to ensure the most
accurate data. In addition, a longitudinal, follow-up study that compares the changes in the IPC
and market agility of these firms between the time the data was collected and at some point in the
future may help reveal essential information concerning why some firms are better than others at
developing superior market agility and how IPC and market agility evolve over time and under
varying environmental conditions. Meanwhile, future research could explore how organizational
mindfulness, IPC, and environmental condition simultaneously combine to achieve improved
market agility (Wang et al., 2019). Lessons learned from these critical processes would provide
valuable knowledge for both research and practice. In future studies, we are also interested in
understanding the variations of the effects of organizational mindfulness towards digital
transformation across different industries. This is constrained by the sample size of the current
In conclusion, the findings of this research provide empirical evidence in support of the idea
that firms leverage market agility by managing relations of digital technology with the firms’
other stakeholders to create superior IPC. This result also demonstrates that in order to reduce the
inherent rigidity that digital technology can bring into an organization, firms need to manage
digital transformation proactively. In keeping with the idea of a cumulative research tradition, it
is hoped that this research will provide a useful foundation for future empirical studies that
employ information processing as a lens to examine the more comprehensive conceptualization
of digital technology business value. Practitioners could use this research as a starting point for
developing a model for diverse digital technologies that could increase a firm’s market agility,
and hence its prosperity.
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Huanli Li is an Associate Professor at the School of Investment and Finance, Guangdong
University of Finance, Guangzhou, China. Her research interests include Fintech, RMB
Internationalization Strategy, and international banking development. Her publications have
appeared in Forum of World Economics and Policy, Journal of Finance and Economics, and New
Yun Wu is an Assistant Professor in Information and Decision Sciences at the Perdue School of
Business, Salisbury University, USA. Her research interests include IT business value, IT
innovation adoption and healthcare information systems. Her publications have appeared in
Journal of Supply Chain Management, The International Journal of Logistics Management, IEEE
Transactions on Education, The International Review of Retail, Distribution and Consumer
Research, Journal of Educational Technology Systems, and Decision Sciences Journal of
Dongmei Cao is a Lecturer in Business & Management at Coventry University. She holds a PhD
in Strategic Management from Coventry University (2015). Her primary research areas include AI
and knowledge management, social media behaviour, sustainability and innovation. Her research
contexts are primarily associated with Chinese industries and Chinese consumers’ behaviour from
social, cultural, psychological, and environmental aspects. Dr Cao also involves in supervising
PhD students and reviewing journal papers constantly.
Yichuan Wang is an Associate Professor/Senior Lecturer in Digital Marketing at the University
of Sheffield, UK. His research interests focus on examining the role of digital technologies and
systems (e.g., big data analtyics, AI, and social media) in influencing practices in marketing,
tourism management, and healthcare management. His research has been published in the British
Journal of Management, Journal of Business Research, Information & Management, Industrial
Marketing Management, Annals of Tourism Research, IEEE Transactions on Engineering
Management, International Journal of Production Economics, Technological Forecasting and
Social Change, and Journal of Knowledge Management.
Appendix A. Items and Measures
Q1: Digital technology-enabled external relationship management
1. Work with external stakeholders to leverage shared digital technology resources to create a
high level of digital technology capabilities
2. Work with external stakeholders to encourage a high level of digital technology
3. Work with external stakeholders to generate a high level of digital technology solutions
among the firms
Q2: Digital technology-business strategic alignment
4. Integrate digital technology and business strategy to attain strategic alignment
5. Create a shared vision of the role of digital technology in the business strategy
6. Jointly plan how digital technology will enable the business strategy
7. Confer with each other before making strategic decisions
Q3: Digital technology-enabled user relationship management
8. Build respect between digital technology’s providers and digital technology’s users.
9. Build internal partnerships (shared project responsibility) between digital technology’s
providers and digital technology’s users
10. Build internal working relationships between digital technology’s providers and digital
Q4: Digital technology infrastructure management
11. Provide a digital technology infrastructure that is responsive to current business needs
12. Provide a flexible digital technology infrastructure that allows for quick modification in
support of the digital technology plan
13. Provide a digital technology infrastructure that allows for the seamless integration of digital
technology services across the firm
Q5: Organizational Mindfulness towards digital transformation
14. Accurately anticipate digital transformation that is relevant to the firm
15. Make sure that the firm’s strategic plan identifies value from digital transformation
16. Inform management team about valuable options of digital technology before a digital
transformation’s strategic change decision is made
Q6: Market agility
17. Constantly gather external information for strategic responses ahead of the competition by
integrating digital technology with other resources to enhance systems for proactively staying
alert to market
18. Quickly interpret market information for strategic responses ahead of the competition by
integrating digital technology with other resources to enhance systems for competitive
19. Quickly decide among strategic alternatives for market responses by integrating digital
technology with other resources to enhance systems for decision support
20. Deliver a fast solution for a strategic response ahead of the competition by integrating digital
technology with other resources to enhance systems for rapid development and