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Advancing the Concepts & Practices of Information Resources Management in Modern Organizations

Developing Dynamic IT Capabilities: Sustaining IT Advantage Over Time

Developing Dynamic IT Capabilities: Sustaining IT Advantage Over Time
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Author(s): Gerald Grant (Carleton University, Canada) and Bhasker Mukerji (Carleton University, Canada)
Copyright: 2005
Pages: 4
Source title: Managing Modern Organizations Through Information Technology
Source Editor(s): Mehdi Khosrow-Pour (Information Resources Management Association, USA)
DOI: 10.4018/978-1-59140-822-2.ch156

Abstract

The relationship between IT and business performance and the pursuit of a sustainable advantage has been widely studied by researchers (Roach, 1991, 1996; Mata, Fuerst, and Barney, 1995; Hitt and Brynjolfsson, 1996; Bharadwaj and Konsynski, 1999; Carr, 2003). Some researchers have found a positive relationship between IT capability and business performance. For example Bharadwaj (2000) suggest that IT capability rather than IT leads to better business performance. This is so, because as IT becomes more ubiquitous and standardized its ability to be sources of competitive advantage erodes (Carr, 2003). Technology resources, such as those incorporating advanced information technology, do not convey competitive advantage because of their ease of acquisition and imitation. It is more likely that sustained advantage will come from the effective and adroit application of IT, a capability resulting from the possession and development of managerial IT knowledge (Ray, Barney and Muhanna, 2004). Even here, however, the advantages enjoyed by the prescient and adroit exercise of organizational IT capabilities may be fleeting and last only until competitors have duplicated or outmaneuvered them. Undoubtedly, IT capability is a potent resource and if used judiciously can provide advantage, but the sustainability of this advantage remains debatable. It also does not mean that just because a capability provides advantage it will also provide competitive advantage. A specific IT capability may or may not provide competitive advantage but this does not mean that it has no impact upon the firm’s performance. In many instances IT applications become “strategic necessities” (Clemons and Kimbrough, 1986). Adoption of these applications becomes necessary for the organizations to survive but they may not provide strategic advantage. It may also be the case that IT-derived advantages are effective at the business process level but fail to manifest itself sufficiently at the firm level (Ray, Barney and Muhanna, 2004). This raises the question - what makes them “strategic necessities”? The adoption of new IT technology by one organization does not make it necessary for others to imitate. However, a firm may wish to imitate another in adopting IT, if it presumes that the competing firm is getting some competitive advantage by doing so. The result of many firms adopting similar IT though, is that it quickly becomes standard practice, eroding the advantage that may have accrued to the early adopter. Such has been the case for firms adopting enterprise system software from firms such as SAP and Oracle. Thus, protecting advantages provided by IT has become increasingly difficult in the rapidly changing business and technological environment. The innovator will only be able to exploit its advantage for a limited period of time before its competitors launch a counterattack. With the launch of this counterattack, the original advantage begins to erode and therefore a new initiative is required. In this paper we advocate that instead of concentrating on sustaining advantages generated by a specific IT capability for the long term, organizations should focus upon generating short-term advantages while, at the same time, putting significant effort into continuously creating opportunities for developing new advantages. We provide background to our arguments in the next section. This is followed by the presentation of a conceptual model. We use a brief case study to illustrate our arguments and model.

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