Impact of Information Technology on Sustainable Management Procedures (Research Paper Sample)

A RESOURCE-BASED ANALYSIS ON THE IMPACT OF INFORMATION TECHNOLOGY ON SUSTAINABLE MANAGEMENT PROCEDURES IN A COMPETITIVE BUSINESS ENVIRONMENT
ABSTRACT
This paper discusses the effects of information technology (IT) on firm performance from a resource based theoretical perspective. It discusses the process managers go through in order to revitalize their businesses, improve business administration and gain competitive advantage through ITs. The paper proposes a resource-based model by examining the existing literature on IT and competitive advantage. The proposed model is evaluated based on the results from an empirical study of a prominent Nigerian firm. In order to complement the primary data obtained, secondary data gotten from a previous study of a New Zealand company was also used in validating the proposed model. The findings suggest that firms could gain an advantage through a combination of capabilities and an inclusive approach to IT development. Also, the results show that ITs alone cannot produce sustainable advantages, but that firms must organize and manage ITs in such a way as to leverage other firm resources and capabilities. The result is an indication that adopting IT has positive effects on innovative practices, which increases the competitive advantage of firms. The major contribution of this study is the development of a resource-based model that shows how firms can exploit IT adoption and innovation to enhance management procedures for gaining sustainable competitive advantage in a competitive business environment.
KEYWORDS: Information Technology, Business Management, Resource Based View, Innovation, Competitive Advantage.
A RESOURCE-BASED ANALYSIS ON THE IMPACT OF INFORMATION TECHNOLOGY ON SUSTAINABLE MANAGEMENT PROCEDURES IN A COMPETITIVE BUSINESS ENVIRONMENT
1 INTRODUCTION
The importance of ITs to business practices has long drawn the attention of researchers and managers. Information technology is a wide field, and has enabled organizations across the world to work in an efficient manner. It plays a very important role in the effective management of a business. IT thus constitutes an essential field of study in business administration and management.
The belief that IT investments can produce competitive advantages has generated lots of controversy. While some argue that the ubiquitous nature of IT has made its benefits accessible to all and therefore cannot create any competitive advantage (Carr, 2003; Chae, Koh and Prybutok, 2014), others maintain that the complexity and proliferous nature of IT has increased its strategic importance and requires innovation to maximize (Melville, Kraemer and Gurbaxani, 2004; Luse and Mennecke, 2014). There is now a pervasive use of IT across the globe, particularly in the last three decades. In this time period, organizations have invested hugely towards the adoption of ITs. But as organizations face stiff competition in the marketplace, the promised benefits of investments in IT has not occurred in many cases. Thus it is evident that in many organizations, IT is not being used effectively and efficiently for organizational competitive advantage.
The resource-based view (RBV) focuses on resources and capabilities and places emphasis on sustainability of competitive advantage. According to Barney (1991; 2014), the RBV argues that a firm’s source of competitive advantage lies with the resources and capabilities it owns and controls and the unique way in which a firm bundles them together. It is widely believed that managing information systems and technologies is a capability that can create uniqueness and provide organizations a competitive advantage. This research is in accordance with this view. Hence, the research objective is to strengthen claims that organizational advantage can be achieved through managing information technology.
The rest of the paper is therefore structured as follows: Section two reviews related literature with focus on IT and competitive advantage. Section three presents the research method used. Section four presents the proposed model for this study. Section five presents our data analysis. Section six discusses the findings of this study while Section seven concludes the study, and states its implications to practice.
2 LITERATURE REVIEW: IT AND COMPETITIVE ADVANTAGE
The belief that IT investments can produce competitive advantages has generated lots of controversy. For instance, much debate has arisen from the standpoint of Carr in his 2003 article "IT doesn’t matter”. Carr (2003) notes that the benefits of IT are accessible to all and cannot create competitive advantage. He maintains that IT’s power and ubiquity have grown; as such its strategic importance has diminished. Carr’s suggestion that companies should lessen their IT investments is dangerous. While Carr’s claim that IT is ubiquitous and increasingly inexpensive is not debatable, one still has to maintain that there are some conditions under which IT can generate competitive advantage. By not considering the ability to manage these IT assets as a potential differentiator, Carr (2003) comes to the conclusion that firms cannot gain competitive advantage through IT and should therefore take up a distrustful position with respect to IT investment and management. Hence, it is an appropriate framework to guide this review.
1 Information Technology and Firm Competitiveness
Information technology can change the way businesses compete. According to O’Brien (2004), information systems should be viewed strategically, i.e. as vital competitive networks, and as a means of organizational renewal necessary to survive in today’s dynamic business environment. The authors suggest that investments in technology can help a business to lock in customers and suppliers (and lock out competitors) by building valuable new relationships with them. In the dynamic business world of today, business managers need to understand that we are in the ‘age of collaboration’. Collaboration is the new foundation of competitiveness. According to Valacich, Schneider and Jessup (2014), collaboration is the increasing richness of means by which things, people, and firms can work together enhanced by the medium of the Internet. Collaboration can be among employees, stakeholders, firms, and things. The nature of organizations and dynamics of competitiveness are changing to the Open Networked Enterprise (ONE) (Tapscott, 2005; Laudon and Laudon, 2011). Any company that wants to have an open networked enterprise must exhibit flexibility, agility, transparency, and have a positive attitude to change.
2 Resource Based View of Competitive Advantage
A firm is said to have a sustained competitive advantage when it is implementing a strategy not simultaneously implemented by many competing firms and where these other firms face significant disadvantages in acquiring the resources necessary to implement this strategy (Mata et al., 1995; Jin et al., 2014). The idea of competitive advantage is to measure firm’s success relative to competitors. According to Barney (1991), relative success could be measured by "economic value" that firms are able to generate. A resource based view of strategic management examines the resource capabilities of firms that enable them to generate above normal rates of return and a sustainable competitive advantage. Examples of resource capital include superior distribution channels, lean cost structures, patented core competencies, and customer loyalty (Amit and Schoemaker, 1993).
Researchers have generally used three criteria to define competitive advantage. In their model of competitive advantage, Mata et al. (1995), identified that a resource can generate competitive advantage if it satisfies the criteria of being valuable, heterogeneously distributed across competing firms, and imperfectly mobile (hard to imitate). Rastrick & Corner (2010), in their study based on the RBV, investigated how ICTs are successfully combined with other resources. They presented an integrated model of advantage whereby organizations combine resources to form capabilities critical to the development of information systems. From a resource based perspective, sustainable competitive advantage is the outcome of discretionary rational managerial choices, selective resource accumulation and deployment, strategic industry factors, and factor market imperfections (Oliver, 1997; Laudon and Laudon, 2011; Chukwunonso, 2013).
3 The Value of Information Technology
A resource is valuable if it helps firm implement strategies that reduce costs or increase sales turn-over (Barney, 1991). However, IT reducing costs and/or increasing revenues is not the same as IT being a source of sustained competitive advantage for a firm (Mata et al., 1995; Chukwunonso and Ribadu, 2013). Therefore in dividing capabilities, it is important to distinguish between those that have value and those that can be a source of competitive advantage. The first condition (value) is necessary for the second (competitive advantage) to occur (Bhatt and Grover, 2005). Many previous researches have pointed to the fact that significant relationships exist between IT investments and business performance. According to Mithas et al. (2012), IT infrastructure has been described as an important organizational capability that can be an effective source of value. In today's environment, a quality IT infrastructure can provide firms with the ability to share information across different platforms innovate and exploit business opportunities, and the flexibility to respond to changes in business strategy. However, the existence of open architectures and standardized enterprise packages suggest that this capability might not be heterogeneously distributed across firms—or, even if it is...