Business Performance, Business Strategy, and Information System Strategic Alignment: An Empirical Study On Chinese Firms
Business Performance, Business Strategy, and Information System Strategic Alignment: An Empirical Study On Chinese Firms
Business Performance, Business Strategy, and Information System Strategic Alignment: An Empirical Study On Chinese Firms
Abstract: The alignment between information systems (IS) and business strategy along with its implications
for perceived IS effectiveness and business performance is an important question, which is rarely studied in
China. Based on an empirical study, this paper summarized the significance of IS strategic alignment and its
impact on business performance. This study also measured business strategy, information system strategy,
and information system strategic alignment, built a conceptual model to describe the relationship between
these factors, and investigated their implications for information system performance and business perform-
ance. A structural equation model was employed to test the conceptual model. Analyses of data gathered in
a survey indicate that information system strategic alignment is a better predictor of business performance
than business strategy or information system strategy alone, although business strategy can significantly in-
fluence business performance.
Key words: business strategy; information system strategy; information system strategic alignment; informa-
tion system performance; business performance
The results of these studies provide suggestions for performance, we should find reliable and reasonable
practitioners in IS field that the direction, priority of methods to measure alignment between business and
projects, staffing, and the use of IS function should be information system strategy and business performance
adjusted according to business requirements. The plan- and should put forward rational hypotheses on the rela-
ning and investments of IS portfolios of systems tionship between these factors.
should fit for the change of dynamic environment.
As part of business strategy, information system 1 Theoretical Development
strategy helps firms implement strategic plans, achieve
Henderson and Venkatraman[8] developed a model for
operational objectives, and gain competitive advan-
conceptualizing and directing strategic management of
tages in the end[6]. Compared to information system
information technology. This strategic alignment
development in developed countries, the dynamic
model is defined in terms of four fundamental domains
alignment of business strategy with information system
of strategic choice: business strategy, information
strategy in China is in a more difficult situation. First
technology strategy, organizational infrastructure and
of all, China’s transitional and emerging economy has
processes, and information technology infrastructure
experienced the reform and rapid development during
and processes. Two fundamental characteristics of the
the past two decades. In this period, state-owned com-
strategic management are illustrated: strategic fit and
panies are experiencing painful transformation of their
functional integration. Sabherwal et al.[9] studied stra-
business strategy and organizational structure. Private
tegic information systems management and described
companies, relatively young and small, are looking for
the evolution of information system alignment with
opportunities to survive and grow, and their strategies
business strategy and structure. They dynamically in-
are generally ambiguous. Secondly, rapid changes of
corporated the dimensions of alignment and the rela-
internal and external environments in China require
tionship between them and examined the alignment
that companies are equipped with capabilities of re-
from a holistic perspective.
sponding to the changes quickly and accommodating
This study brings strategic management theories into
new and flexible components and applications. Thirdly,
the field of IS and puts forward a model as shown in
many firms have the opportunity to expand existing
Fig. 1, which explores the relationship between IS stra-
business or enter new markets. This special environ-
tegic alignment and business performance.
ment contributes to the low stability of business strat-
egy. The dynamic process of alignment between busi-
ness and IS strategy is like “a moving target”. Com-
pared to the firms in western countries, it is more diffi-
cult for Chinese companies to make IS strategy based
on their business strategy. It is meaningful both in the-
ory and in practice to investigate the alignment be-
tween business strategy and information system strat-
egy for Chinese firms.
However, limited research was found on the influ- Fig. 1 Theoretical model of information system stra-
tegic alignment and business performance
ence of information system strategic alignment on
business performance. One reason is that business According to Venkatraman’s empirical study[10],
strategy is too abstract to measure quantitatively, while business strategy is not an organizational process for-
descriptive analysis of the strategy could not be per- ever in motion, but imposes continuously on business
suasive in the rigorous framework of empirical studies. performance[11,12]. Similarly, this conclusion could be
The other reason is that the alignment of information extended into the field of information systems, exam-
system strategy and business strategy is so complex ining the relationship between strategy and perform-
that it is hard to understand and measure quantitatively ance at the information systems level[13-15]. Therefore,
in spite of case studies in this area[7]. To empirically we propose the following hypotheses in the model:
study the influence of information systems on business
350 Tsinghua Science and Technology, June 2008, 13(3): 348-354
The frequencies of the strategic activities in firms were and gestalts. Moderation is the most important per-
measured using 1=least; 2=less; 3=medium; 4=more; spective because IS strategic alignment is an interac-
5=most. Because information system strategy provides tive factor between business strategy and information
support for business strategy, adopting the same di- system strategy. We employ the dimensions of Miles
mensions could guarantee consistency. Additionally, and Snow’s[22,23] typology to measure information sys-
the same classification makes it easier to explore in- tem strategic alignment and to multiply the corre-
formation system strategy alignment. sponding value of each dimension in business strategy
and information system strategy.
2.3 Business performance
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