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Article history: Despite a plethora of studies that demonstrate the positive impacts of information technology (IT)
Received 6 April 2014 capabilities on innovation performance, our knowledge of the processes through which such gains are
Received in revised form 11 May 2015 achieved and their susceptibility to environmental factors remains limited. This paper fills these gaps by
Accepted 15 May 2015
examining the roles of corporate entrepreneurship (CE) and competitive intensity at the firm level,
Available online 12 June 2015
thereby contributing to research on IT business value. Using data from manufacturing firms in China, we
find that CE fully mediates the effect of IT capabilities on product innovation performance and that
Keywords:
competitive intensity moderates the proposed relationships.
IT capabilities
Corporate entrepreneurship
ß 2015 Elsevier B.V. All rights reserved.
IT business value
Competitive intensity
Product innovation performance
Matched survey sample
http://dx.doi.org/10.1016/j.im.2015.05.003
0378-7206/ß 2015 Elsevier B.V. All rights reserved.
644 Y. Chen et al. / Information & Management 52 (2015) 643–657
firm’s overall efforts toward venturing, innovation, and renewal comprised of three fundamental activities: business venturing,
directed at advancing new opportunities to use or expand its new product development and self-renewal [58]. Business
resources [67]. CE activities are conceptualized to be directly venturing reflects an emphasis on the creation of a new business
related to important organizational outcomes such as growth and unit or acquisition of a new business; new product development
profitability [68]. In addition, a firm’s CE activities are susceptible involves the transformation of new ideas to value-added
to the influence of external factors such as environmental products, services or organizational changes; and self-renewal
dynamism [68]. reflects domain redefinition and business model reconstruction
The CE framework is appropriate for this study because it [28].
enables the integration of various aspects that are related to CE offers a promising lens for examining the path from IT
information and processes that are critical for a richer under- capabilities to firm-level outcomes. Specifically, firms with high
standing of IT-enabled innovation. IT-enabled innovation is levels of CE activities tend to invest more in product development
attributed to both a firm’s internal activities and processes and and improvement, new business domain exploration, and process
external environment influences. We examine the role of CE in IT- redefinition, all of which can enhance firms’ product innovation
enabled innovation to gain a better understanding of the IT– performance. Such high levels of CE activities may be achieved
innovation relationship by considering the influencing role of when firms successfully leverage their information technologies
competitive intensity, which is a critical indicator of the external [20], suggesting that the impact of a firm’s IT capabilities on
business environment. Furthermore, anecdotal evidence suggests product innovation performance may be influenced by the
that effective CE depends on the availability of relevant and timely intermediary role of CE activities. CE is a useful theoretical
information and of reliable communication channels, which are framework for this study because it explicitly takes the firm’s
the hallmark of IT (e.g., [7]). Indeed, it was recently argued that ‘‘IT external business environment into account [68], thereby permit-
is the magic ingredient that inspires and most often enables ting us to examine the path from IT capabilities to product
contemporary entrepreneurial endeavors’’ [20, p. iii]. Thus, the CE innovation performance under varying environmental conditions.
framework appears to be capable of offering a conceptual bridge Specifically, the framework conceptualizes the moderating effect
between IT capabilities and a firm’s product innovation perfor- of competitive intensity on the relationship between IT capabili-
mance while also taking the firm’s external business environment ties, CE and product innovation performance, whereby more
into account. dynamic environments are viewed not only as uncertain and harsh
This paper offers the following three contributions to research but also as representing the opening and closing of a myriad of
and practice. First, it contributes to the business value of the IT windows of opportunities for entrepreneurial activities.
literature by developing a theoretically grounded model that traces Firms that are involved in entrepreneurial activities must have
the path from IT capabilities to a firm’s product innovation relevant and timely information. For example, referring to the
performance through the mediating role of CE. Second, it famous aphorism of performance measurement—‘‘what gets
contributes to the foundational literature of CE by (a) extending measured, gets done’’ [5], Stopford and Baden-Fuller [61] reported
our understanding of how IT enables CE activities and (b) shedding that in the organizations that they studied, existing IT focused on
light on the moderating role of the external business environment the old strategy and excluded new information. Thus, what was
(i.e., competitive intensity). Finally, the paper contributes to known was measured and used to inform future decisions, and
practice by helping managers better identify the business what was unknown, and could have potentially informed new
environment where their investments in IT capabilities are most strategies, was ignored. According to Stopford and Baden-Fuller
likely to be observable, thereby informing their decisions regarding [61], organizations that sought to engage in and leverage
IT implementation and use. entrepreneurial activities discontinued IT that provided ambigu-
The remainder of this paper is organized as follows. In the ous and misleading information and obtained new IT that provided
following section, we briefly discuss the CE literature to provide a means for testing initial hunches. They also noted that the firms
conceptual framework and clear theoretical boundaries at the firm that they studied made substantial investments to enhance their
level. We then discuss the anticipated relationship between IT learning by obtaining data that would help them to receive and
capabilities and CE and follow up with a discussion on the expected evaluate feedback on new initiatives.
impact of the environment’s competitive intensity. Next, we Effective CE activities also require those who are involved to
describe the methodology of the study and present the empirical have access to reliable means of communication and an integrated
results. We conclude the paper with a discussion of our findings view of the organization. These requirements stem from the notion
and their limitations and offer several avenues for future research. that CE is a firm-level activity, and successful CE initiatives are
often the outcome of coordinated interactions among individuals
2. Corporate entrepreneurship (CE) and groups that occupy different hierarchical positions within the
firm and are located at various geographical locations. Without
Entrepreneurship is ‘‘the process by which individuals – either appropriate communication channels and an integrated perspec-
on their own or inside organizations – pursue opportunities tive that includes collaborating, sharing information and incorpo-
without regard to resources they currently control’’ [59, pp. rating related activities, it would be difficult to conceive of and
23]. Focusing on organizational behaviors, CE is defined as ‘‘a execute entrepreneurial plans [68].
vision-directed, organization-wide reliance on entrepreneurial In sum, the above requirements for effective CE – namely, the
behavior that purposefully and continuously rejuvenates the need for (1) relevant and timely information, (2) an integrated
organization and shapes the scope of its operations through the view of the organization, and (3) effective communication – appear
recognition and exploitation of entrepreneurial opportunity’’ [31, to be closely aligned with the main attributes of IT—i.e., enabling
pp. 21]. Given its clear importance to a firm’s growth, performance the efficient collection and dissemination of information across the
and survival, CE has attracted much attention from strategy organization, helping to electronically integrate disparate business
scholars (e.g., [58]). CE is a process through which a firm seeks to activities and providing access to multiple communication media.
innovate, creates new businesses and transforms itself by changing This apparent alignment suggests that IT capabilities can play an
the business domain or key strategic processes to influence the important enabling role for CE activities within firms and help
firm’s various performance outcomes [58]. Although CE encom- firms achieve sustained competitive advantage and superior
passes a variety of activities, there is a common core that is performance.
Y. Chen et al. / Information & Management 52 (2015) 643–657 645
In the next section, we elaborate on the nature of the IT facilitating information sharing across different functions and
capabilities construct and then put forward hypotheses regarding implementing extensive changes in business processes [10]. IT
the relationships between IT capabilities and CE. integration can improve a firm’s ability to sense and respond to
opportunities in the market and to integrate business processes
3. Hypothesis development [54]. IT management is considered central to the success of product
development efforts [71]. IT business alignment focuses on
In this section, we derive five hypotheses and develop a maintaining an IT strategy that is consistent with a firm’s business
theoretical model that builds on the foundations of the CE strategy to support the formulation and realization of the firm’s
framework and extends it to the context of IT. The main constructs innovation goals [46].
and the hypothesized relationships among them are depicted in Conceptualizing the construct of IT capabilities as a second-
Fig. 1. order construct is further important for the present study because
CE activities often span many business units and different
3.1. IT capabilities organizational functions, suggesting that a perspective that
focuses on a single component of IT capabilities can be construed
IT capabilities refer to a firm’s ‘‘abilities to mobilize and deploy too narrowly to provide a comprehensive understanding of the
IT-based resources in combination or co-presence with other relationship between IT capabilities and CE activities. The
resources and capabilities’’ [7, pp. 171]. They have the potential to relationship between IT and firm innovation has drawn much
help firms outperform their rivals in terms of cost reduction, profit attention from academics and practitioners. The extant research
increasing and other performance measures [32]. Because the often examines the various innovation-enabling effects of specific
construct of IT capabilities refers to a broad range of common IT capabilities in isolation—e.g., IT infrastructure and IT-leveraging
information and communication tools and related services, past capabilities [52]. Yet, product innovation is a cumulative, firm-
publications argued that it is more accurate and useful to view the wide process that involves various functional units and activities
construct of IT capabilities broadly and conceptualize it as a [53], and a systemic approach is required to examine IT-enabled
formative second-order construct (e.g., [6,7]). In this study, we innovation at the firm level. Therefore, in this study, we examine
adopt this view and treat IT capabilities as a second-order the impacts of overall IT capabilities on product innovation by
construct that consists of four dimensions: IT infrastructure applying a comprehensive conceptualization of IT capabilities.
flexibility, IT integration, IT business alignment, and IT manage- Referring to the abovementioned apparent link between the
ment [73]. IT infrastructure flexibility refers to the extent to which requirements for effective CE and the main attributes of IT, we
a firm’s IT infrastructure is scalable, modular, compatible with propose IT capabilities as an important antecedent of CE activities.
legacy systems and able to address multiple business applications To substantiate this proposition, we discuss how IT capabilities can
[10]. IT integration refers to the extent to which a firm links its IT to influence CE in three main ways, i.e., helping to create and share
those of business partners, helping the partners to exchange relevant information, facilitating communication, and enabling the
information, communicate, and establish collaborative relation- refinement and reconstruction of business systems and their
ships [54]. IT management refers to the firm’s ability to effectively integration into a cohesive whole. These IT capabilities correspond
implement IT-related activities such as IT project management, to three activities that are viewed as integral to successful CE. To
system development and IT evaluation and control [71]. IT reiterate, for CE to be effective, firms should collect, analyze and
business alignment refers to the extent to which IT and business interpret data about the firm’s competitors, industry changes and
operations share congruent goals and maintain a harmonious trends; these data can help to launch new ventures [68]. In
relationship [46]. Although other conceptualizations and measure- addition, the initiation and implementation of CE depends on the
ments of IT capabilities exist in the literature (e.g., [7]), we expect quality and amount of communication among the employees and
that those that are used in this study are more likely to covary with business units that are involved in CE activities across the firm
CE and innovation-related activities and thus better explain [68]. Furthermore, CE appears to be most effective when different
variability in key outcome variables. Specifically, a flexible IT business units can be adapted and integrated to support new
infrastructure can provide firms with the ability to innovate by initiatives. Table 1 provides a summary of the attributes of IT
Control variables
Firm size
Firm age
Ownership structure
IT infrastructure Industry type
flexibility Past performance
IT integration
IT management Competitive
intensity
Table 1
Summary of IT attributes and their impacts on CE.
Information creation and sharing IT capabilities provide entrepreneurially relevant information and build a supporting technological
environment within a firm
Communication facilitation IT capabilities facilitate communication and interactions within and across a firm’s boundary to improve
innovation more effectively
Business system refinement IT capabilities increase both the speed and effectiveness of internal changes and transformation within firms
and reconstruction
capabilities and their impacts on CE. Below, we provide a detailed communication and collaboration enabled by IT plays a significant
explanation of how IT capabilities can help to support the role in accelerating product development and delivery to the market.
effectiveness of CE. For example, Oracle leverages the Oracle PartnerNetwork (OPN) to
First, IT capabilities can enable CE by offering information that manage partners of varying sizes and business models to support its
is required for relevant CE activities and building a supporting new market expansion strategies [14]. Accordingly, a firm with
technological environment within a firm. For example, strategic strong IT infrastructure and IT business alignment could benefit
utilization of IT can promote a firm’s entrepreneurial alertness, i.e., from better communication and collaboration among its various
proactive attentiveness to information that is relevant to functional departments and with its partners, thereby helping R&D,
entrepreneurial activities [58]. The ability to quickly scan data manufacturing, and other functional departments to innovate more
and sense information about market trends is critical to a firm’s effectively—i.e., design, build and develop new products and services
willingness and capacity to engage in CE activities. Firms use IT to that customers want.
collect data from multiple channels and elicit information about Third, IT capabilities play an important role in supporting CE
customers’ demands and preferences to increase the success of activities by enabling the refining and reconstructing of founda-
new product development. For example, GM uses a Web-enabled tional business systems and their integration. The success of CE
tool to collect data on customer preferences to better design new activities depends on whether a firm can rapidly and efficiently
products [56]. Data regarding external entities, including compe- refine and adapt its business activities, processes and structures. IT
titors, partners, and other stakeholders, can be collected and capabilities can contribute to a firm’s CE by increasing both the
processed using IT-based tools to identify market opportunities. speed and effectiveness of these internal changes and transforma-
Quick access to real-time environmental data is critical for a firm’s tions. Specifically, modularization of a flexible IT infrastructure
ability to proactively identify and respond to opportunities and enables firms to integrate disparate systems and thus efficiently
make decisions about entrepreneurial initiatives. A flexible IT adopt, implement, and upgrade new systems in response to
infrastructure enables a firm to collect and analyze data about evolving business needs [8]. A firm with a flexible IT infrastructure
products and customer demands and preferences and then can reduce the time to market for new products due to its readiness
distribute the data among various business processes, including to implement new applications, easy access to the relevant data,
R&D, manufacturing and procurement; therefore, it can promote and networking abilities. For example, several US airlines have
efficiency and effectiveness in new product development. For developed airline reservation systems that offer new services, such
example, as a collection of decision support technologies for firms, as ‘‘frequent flyer’’ programs, and have created joint incentive
business intelligence software could effectively shorten the time programs with hotels and car rental agencies, which largely rely on
lag between data acquisition and decision making, thus converting the airlines’ IT-enabled flexibility and integration [37]. In addition,
customers’ demands into new products [12]. A firm with strong IT by making it easier to identify available resources and providing
management capability and sophistication is characterized by the the visibility of processes and activities across the organization, IT
ability to manage IT resources to address key aspects of business capabilities can enhance a firm’s ability to quickly and accurately
strategy. With the support of a high level of IT management allocate resources to new initiatives and tasks, such as cycle time
capability, a firm can better leverage data collection and processing improvement, cross-functional processes, and collaborative prod-
capacity to address business purposes. For example, IT manage- uct development.
ment is important for identifying, collecting and interpreting To summarize, IT capabilities are expected to form a firm-wide
relevant data and information to support business processes [7]. In technological foundation that can facilitate flexible processes and
sum, with the help of strong IT capabilities, data and information operations and are necessary for launching and implementing new
can be collected, processed, used and shared among various ventures, developing new products, and renewing business
functional departments to identify business opportunities and processes and business models. Consequently, we anticipate that
make decisions in response to market changes. IT capabilities enable and enhance CE. Hence,
Second, IT capabilities can support CE by facilitating communi-
cation and interactions within and across a firm’s boundary and, H1. IT capabilities are positively related to CE.
thus, bringing together different groups of relevant stakeholders. A
firm’s entrepreneurial activities often require contributions from 3.2. Product innovation performance
many participants and sponsors in different business units,
suggesting that a large number of available communication Innovation is the successful implementation of creative ideas
channels is critical for the success of entrepreneurial endeavors. within a firm [26]. It is generated from raw ideas that are created
The presence of strong IT capabilities in a firm can promote and within the firm or derived from the adaptation of new knowledge
support communication and information sharing among individual that is found outside of the firm. Innovation is generally regarded
employees, functional departments and units as well as between as a key ingredient in a firm’s competitiveness and its ability to
the firm and its business partners. IT-enabled communication survive in a dynamic business environment [26]. Prior studies have
capability helps to support collaboration efforts among various argued that innovation can be the most important determinant of a
functional units that are targeted at addressing customer demands, firm’s performance, and evidence has been found that new
new product design and engineering [52]. Interorganizational products account for up to one-third of firms’ financial growth
Y. Chen et al. / Information & Management 52 (2015) 643–657 647
(e.g., [49]). As a key aspect of overall innovation, product by the lack of an observable direct impact of IT capabilities on firm-
innovation plays a critical role by enabling firms to earn abnormal level outcomes and by the expected direct link between CE and
profits and providing a channel for the firms to enter new markets such outcomes. It is further motivated by the hypothesized link
and industries [50]. Given the interdisciplinary nature of product between IT capabilities and CE activities.
innovation, studies have examined the antecedents of product
innovation and its performance from different perspectives (e.g., H3. CE fully mediates the relationship between IT capabilities and
[50]). For instance, from a marketing perspective, Luca and product innovation performance.
Atuahene-Gima [45] argued that market knowledge serves as a
mediator between cross-functional collaboration and product 3.3. Competitive intensity
innovation performance. Tang et al. [62] focused on the role of a
firm’s strategic human resource management in the relationship The CE literature conceptualizes a firm’s external business
between entrepreneurial orientation and product innovation. environment as important. Some scholars argue that in contrast to
Prior research argued that the observed variation of firm certain aspects of an organization’s life (e.g., hiring, turnover
performance could be explained by various levels of CE (e.g., [69]). intentions), CE seems to flourish under conditions of greater
For instance, established firms with strong CE could effectively environmental dynamism and is often viewed as a useful
leverage financial resources and managerial expertise to success- mechanism for responding to new competitive forces [68]. Specifi-
fully introduce new products or services [69]. Because CE is cally, firms that operate in dynamic environments are likely to be
conceptualized as being comprised of three dimensions – i.e., more innovative, less risk-averse, and more proactive than those
business venturing, new product development and self-renewal – facing less uncertainty and fewer external pressures [67]. Environ-
the present study aims to elaborate on the impact of CE on product mental dynamism captures the perceived instability of the firm’s
innovation performance in terms of these dimensions. First, firms market due to ongoing changes, and for some firms, such
with high levels of entrepreneurial ventures tend to assume a dynamism brings new business opportunities [68]. Specifically,
proactive stance in monitoring the environment and actively changes in the business environment can open many windows of
leverage the insights about the market and competition to help opportunity, thereby prompting a spur of entrepreneurial activity
make better decisions about new product development [21]. Sec- that aims to capitalize on such opportunities [68]. For instance,
ond, by focusing their efforts and resources on activities that are firms that face dynamic external business and market conditions
related to new product development, firms that have a high level of may consider novel business ideas to supplant or supplement their
CE more effectively search for new ideas, engage in innovative core business activities via internal development or diversifying
thinking, and refine operational processes that can lead to the into new markets [68].
generation of new insights and technologies [42], which are As an important indicator of environmental dynamism,
fundamental for eliciting high returns from product innovation competitive intensity reflects the degree to which firms face
efforts. Third, firms with high self-renewal abilities often embrace competition within their industries [25]. Intense competition is
and try new resource combinations, which can improve product often associated with fierce price wars, heavy advertising and
innovation processes and enhance product innovation outcomes. many competing product offerings. For example, firms in more
It is important to note that CE and product innovation technology-intensive industries, such as the electronic product
performance are conceptually and empirically different concepts industry, experience more rapid changes in technology develop-
despite their apparent similarity in terms of the dimension of new ment and face more uncertainty and more intense competition
product development [15,49]. New product development is a [66]. A firm’s external business environment can influence internal
process by which attempts are made to transform inventions into processes by creating or obstructing strategic matches, which
marketable and value-adding products, processes, services, or could interfere with internal processes that are designed to help
organizational changes [28]. It encompasses the R&D activities that the firm attain better performance. Aragon-Correa and Sharma’s
a firm undertakes for the purpose of improving innovation [1] work suggested that environmental factors can moderate the
performance. By contrast, product innovation performance assesses relationship between the deployment of various organizational
the contribution of product innovation to firm performance [15]. capabilities and environmental strategy. Although the strategy
Based on the preceding discussion, we expect a positive link literature foresees both positive and negative outcomes of
between a firm’s CE activities and its performance in terms of operating within an intensely competitive business environment,
product innovation. Therefore, we propose the following hypoth- the CE literature mainly expects a spur of entrepreneurial activity.
esis: Specifically, when competition is intensive, firms need to
engage in risk-taking and entrepreneurial activities that require
H2. CE is positively related to product innovation performance. both learning and exploration to break out of price wars [70]. Such
Combining H1 and H2, it can be inferred that CE operates as an activities include innovating new products, exploring new
intermediary in the relationship between IT capabilities and markets, seeking novel ways to compete, and examining how to
product innovation performance. High levels of CE, as a capability, achieve differentiation [70]. In conditions of highly intensive
may be achieved when firms successfully leverage their informa- competition, firms tend to pay more attention to their competitors.
tion technologies. The combination of these arguments suggests To differentiate themselves from their competitors, firms like to
that CE mediates the relationship between a firm’s IT capabilities use their resources to invest in R&D and product innovation. In this
and product innovation performance. Firms with high levels of IT situation, firms increasingly depend on CE activities to achieve
capabilities could engage in CE in a manner that develops new higher product innovation performance. Accordingly, we propose
products, ventures in new business, and renews the existing the following hypothesis:
operation with efficiency and effectiveness. High levels of CE
H4. Competitive intensity positively moderates the relationship
provide opportunities for firms to achieve high product innovation
between CE and product innovation performance.
performance.
We conceptualize CE as a full mediator of the path from IT Extending the CE framework to the context of IT, we foresee
capabilities to product innovation performance. In other words, we another role of competitive intensity. Various scholars argue that
hypothesize that IT capabilities influence product innovation the role of IT in firm-level outcomes can depend on differences in
performance only through CE. This conceptualization is motivated exogenous variables (e.g., [60]). Some have argued that a proper fit
648 Y. Chen et al. / Information & Management 52 (2015) 643–657
between internal organizational mechanisms and exogenous vari- concentration of manufacturing firms worldwide [43]. Due in part
ables is necessary for achieving superior firm performance (e.g., [9]). to ongoing economic and political reforms that produce different
Recent studies note that the effects of IT capabilities on firm ownership structures, such as state-owned and the emerging
performance may be contingent on external business environmental private and foreign-owned companies, at least some of the firms
factors, such as environmental dynamism (e.g., [18]). For example, experience heightened competitive intensity, thereby helping us to
Nevo and Wade [51] proposed that certain IT-enabled resources may test H4 and H5. Second, although IT deployment has increased
become less or more strategic in the presence of greater uncertainty greatly in China, the leveraging of IT to create business value
in a firm’s business environment. Furthermore, Stoel and Muhanna remains a new discipline, and empirical studies on IT issues in
[60] found that the returns on IT capabilities vary according to China are sparse [13]. We gathered data through a field study that
different levels of environmental factors. Consistent with the obtained responses from (1) senior IS leaders, such as Chief
theoretical framework guiding this study and with the above- Information Officers (CIOs), IT directors, and IT managers and (2)
mentioned literature, we examine how competitive intensity business leaders, i.e., CEOs. Separate questionnaires were devel-
moderates the relationship between IT capabilities and CE. oped for an IS leader and a CEO in each firm. Because they are well
Organizational capabilities and resources can play different versed in the organizational capabilities pertaining to IT and the
roles in highly competitive environments and in less intensely innovative management of their organizations, IS leaders and CEOs
competitive environments. In an environment that is characterized were considered appropriate participants for our study. Such a
by intense competition, top managers often face the imperative to multiple-source design could also reduce systematic measurement
differentiate their products or services and have a greater need for errors, such as the common method variance.
information and information processing capacity [17]. In such Direct data collection from firms is difficult to execute in China
environments, firms that face changing external conditions are due to a weak cooperation culture between academia and industry
often required to quickly and effectively address environmental [17]. Following Davies and Walters’s advice, we sought assistance
pressures. Thus IT capabilities, which enable firms to effectively from local government agencies that were in a position to request
mobilize various IT assets and resources, are expected to become data from firms in their authority area. This approach was expected
more valuable. In support of this argument, Dong et al. [22] to facilitate data collection and high-quality responses because
reported that a digitally enabled capability of efficient coordina- Chinese firms often depend on those government agencies for
tion becomes more valuable as competition intensifies. Similarly, support and are thus more likely to acquiesce to the agencies’
Nevo and Wade [51] found that IT capabilities (such as IT requests. Using the list of manufacturing firms under the
integration effort and compatibility) become more strategic in the jurisdiction of those agencies, we adopted a probability sampling
face of heightened environmental turbulence. approach to obtain a sample that is representative of local
In a competitive environment, it can be particularly difficult to conditions [17]. The target population is manufacturing firms that
sustain the competitive edge that may have been created because are localized in this region, which are predominantly small to
the rapidly changing environment can neutralize previously medium-sized and state-owned firms. Additionally, most of these
generated benefits or render them obsolete. Such an environment firms produce products such as energy, machinery, and pharmacy.
raises the need for firms to engage in CE activities, constantly With the help of local government agencies, we identified 212 firms
search for new opportunities as they unfold, or renew themselves that seemed to be representative of the target population based on
to improve operational efficiency and effectiveness. These activi- their age, size, ownership structure and industry affiliation. All
ties can include continuously scanning and sensing the market and 212 firms agreed to participate in our study.
seeking relevant information and then communicating it to To minimize the potential for common methods bias and to
relevant organizational members. Such conditions imply an even better infer the causal relationships in our model, we collected data
greater importance of the availability of a flexible IT infrastructure; in two waves, with the second wave taking place one and a half
the collection and analysis of information about customers, years after the first wave. In the survey of the first wave (T1), the
suppliers and competitors; relevant technical and managerial IT CEOs provided information on CE, competitive intensity, past
skills; and the rapid communication of real-time information with performance, and firms’ demographic information (size, age,
internal departments and business partners. Thus, business ownership structure, industry type); the IS leaders provided
environments with intensive competition are expected to make information on IT capabilities. During the second wave (T2), we
CE activities even more dependent on relevant and timely asked CEOs to provide information on product innovation
information, reliable real-time communication channels, and performance. To gather valid information in the Chinese context,
effective organization-wide integration of business units com- we recruited trained assistants to conduct onsite data collection on
pared with less competitive business environments. In other respondents’ companies. We informed participants of the goal of
words, greater competitive intensity is likely to amplify the the survey, assured them of the confidentiality of their answers,
enabling role of IT capabilities in supporting CE activities and the and offered a cash remuneration that is equivalent to an average
efficient implementation of a firm’s entrepreneurial strategy. employee’s half-day salary. We employed these efforts to improve
In light of this anticipated heightened importance of IT response rates without degrading the accuracy of the information.
capabilities for enabling CE under conditions of greater competi- Participants completed the questionnaires during their work hours
tive intensity in a firm’s business environment, we put forward the and returned the completed surveys to the research assistants,
following hypothesis: who then combined the questionnaires that were answered by
respondents from the same firm, thus creating a matched survey
H5. Competitive intensity positively moderates the relationship sample [64].
between IT capabilities and CE. During the first wave (T1), we received responses from 198 CEOs
and 212 IS leaders. After removing unmatched and/or missing
4. Research methodology and analysis cases, the sample in the first wave consisted of 151 matched
questionnaires with complete information. In the second wave
4.1. Data collection (T2), we received 138 completed questionnaires from CEOs, which
all had complete information on product innovation performance.
We collected data from manufacturing firms in one province in Therefore, the final matched survey sample consisted of 138 firms,
Northern China for two reasons. First, this region has the largest resulting in a final response rate of 65.1% (=138/212). Table 2
Y. Chen et al. / Information & Management 52 (2015) 643–657 649
Table 5
Correlation between constructs.
1 2 3 4 5 6 7 8 9 10 11 12 13
Note: The values above .17 are significant at p .05. The shaded numbers in the diagonal row are square roots of the average variance extracted.
a
Coding: ‘small-sized’ = 1; ‘medium-sized’ = 2; ‘large-sized’ = 3.
b
Coding: ‘state owned’ = 1; ‘non-state owned’ = 0.
capabilities contribute to product innovation. Specifically, the 138 manufacturing firms in Northern China, we find evidence that
study shows that IT capabilities enable CE, which is critical to supports our hypotheses that CE fully mediates the relationship
enhanced product innovation performance. The study further between IT capabilities and product innovation performance and
shows that this important enabling role is amplified under that competitive intensity positively moderates the relationship
conditions of intense competition in the firm’s external business between IT capabilities and CE; that is, under conditions of
environment. intensively competitive environments, firms tend to rely more on
IT capabilities to support their CE activities. These findings
5.1. Implications for research contribute to the literature on business value of IT and the
foundational literature of CE. Below, we elaborate on the
With this study’s main purpose of addressing the relationship implications of these findings.
between IT and innovation, a CE framework has been applied to This study is one of the first academic efforts to address IT-
investigate how IT contributes to firms’ product innovation. By enabled innovation, and it contributes to the relevant literature by
proposing and verifying the mediating role of CE in IT-enabled building a model of the IT–innovation relationship. Although
innovation, this study enhances our understanding about IT and specific information technologies and applications have been
the business value of IT. Based on a matched survey sample from found to play a significant role in supporting product innovation in
Control variables
Firm size (-0.03, 0.16)
Firm age (-0.08, 0.04)
Ownership structure (-0.08, 0.08)
Past performance (0.30**, 0.13)
Dummy1-Basic metal (0.22, -0.09)
Dummy2-Non-metallic mineral (0.12, -0.22)
Dummy3-Fabricated metal (0.14, -0.07)
Dummy4-Thermal power (0.15, -0.16)
Dummy5-Chemicals (0.03, 0.03)
IT infrastructure Dummy6-Energy (0.10, -0.11)
flexibility Dummy7-Mining (0.13, 0.03)
0.29** Dummy8-Building materials (0.17*, 0.01)
R2 = 0.39 R2 = 0.22
IT integration 0.35**
IT capabilities Corporate Product innovation
entrepreneurship performance
H1: 0.32** H2: 0.27**
IT business 0.20**
alignment
0.87** 0.89** 0.83**
0.41**
IT management
New product Business Self-renewal
development venturing
Control variables
Firm size (0.01, 0.12)
Firm age (-0.08, 0.05)
Ownership structure (-0.13*, 0.07)
Past performance (0.33**, 0.14)
Dummy1-Basic metal (0.21, -0.09)
Dummy2-Non-metallic mineral (0.10, -0.22)
Dummy3-Fabricated metal (0.10, -0.07)
Dummy4-Thermal power (0.10, -0.16)
Dummy5-Chemicals (-0.15, 0.03)
Dummy6-Energy (0.06, -0.11)
Dummy7-Mining (0.08, 0.03)
Dummy8-Building materials (0.15*, 0.01)
Competitive
IT infrastructure intensity
flexibility
0.29**
0.41**
IT management
New product Business Self-renewal
development venturing
n = 138; Solid lines are significant paths, dotted lines are non-significant paths
**
p ≤ .01; * p ≤ .05; ns, non-significant (two-tailed)
different ways, our understanding of the mechanism through implements more heterogeneous systems, applications and
which IT contributes to innovation remains fragmented; thus, this functions to support business innovation, it is critical for the
mechanism requires further investigation. Our work contributes to firm to possess sophisticated IT management capability to
the IT–innovation literature by adopting a perspective on IT that integrate and coordinate various IT resources and maintain the
focuses on the combination of hardware, software, technical alignment between IT and business demands.
human resources, and applications. Furthermore, this study Furthermore, this study addresses the unsolved question of how
contributes by focusing on the interaction between IT resources IT, which was traditionally considered a fungible tool for reducing
and other organizational resources and introducing the concept of labor costs and increasing efficiency by automating and standardiz-
IT capabilities to the investigation of IT-enabled innovation. ing human activities and routines, can also enable responsiveness,
This integrated perspective on IT helps us examine the roles of flexibility, agility, and innovation performance. The findings of this
firm-level IT competence in generating product innovation rather study help to address this question by highlighting two theoretical
than isolating the impacts of IT. This is aligned with the emerging insights. First, CE fully mediates the impacts of IT capabilities on a
facts that information technologies and applications are closely firm’s product innovation. Both IT capabilities and CE, as firm-wide
embedded in enterprise-wide business activities, processes and capabilities, reside or are embedded in various business routines,
routines within contemporary firms. Furthermore, although activities and processes across different functional departments and
specific IT resources are implemented and developed in an isolated units. In particular, CE is considered the aggregated enterprise-wide
form, they interact with each other and support business activities effort dedicated to recognizing and exploiting new opportunities.
jointly. Thus, a broader view on the impacts of IT is needed. The Second, a firm’s IT capabilities significantly influence CE within the
finding thus extends the IT–innovation relationship literature by firm. CE reflects a firm’s ability to identify and respond to
viewing IT capabilities in an integrated way, allowing for the opportunities using resources. As elaborated in the previous section,
holistic consideration of the impacts of IT infrastructure flexibility, effective CE activities significantly rely on the availability of relevant
IT integration, IT business alignment, and IT management. and timely information, firm-wide integration, and effective
In addition to taking an integrated approach to examining the communication, which is closely aligned with IT’s main attributes.
impacts of IT capabilities as a whole on CE and product innovation, This alignment underlying IT and entrepreneurial activities provides
this study found that IT management has the greatest weight strong rationale for linking IT with CE. The finding of the relationship
among the four dimensions of IT capabilities in the proposed between IT capabilities and CE in this study contributes to the
model. This result implies that IT management could likely play a literature by addressing the aforementioned question of the IT–
more significant role in IT-enabled innovation compared to other innovation relationship with a solid theoretical foundation and
IT capabilities dimensions. With advanced information technol- empirical support.
ogies and various applications implemented to support a variety Recent studies emphasize the business value of IT emerging
of business activities, IT management capability becomes through its complementarity and integration with business
increasingly critical for the success of IT strategy. When a firm strategies, organizational structures, and competencies (e.g., [4]).
654 Y. Chen et al. / Information & Management 52 (2015) 643–657
Following this emergent perspective on IT value, our study proposes market and customers, (2) share real-time information with their
that a CE framework is appropriate for investigating the impacts of IT business partners, (3) reshape and integrate disparate business
on firm product innovation. Findings from this work further activities, and (4) utilize the information to support innovation-
demonstrate that IT capabilities exert a positive and significant related strategic choices. Considered as evidence, more contem-
impact on product innovation performance, albeit indirectly, via CE. porary companies leverage mobile applications, web-based
This result suggests that encouraging and supporting CE activities is applications to collect data and information about customer
an important mechanism through which firms can leverage IT demands and preferences and use business intelligence or
capabilities to enhance product innovation performance. This analytics technologies to interpret these data to improve product
finding also reaffirms the notion that IT capabilities do not directly innovation.
determine firm-level outcomes [4]. Rather, intermediaries such as Second, our results suggest that the value of IT largely
CE are needed for the realization of the strategic potential of IT depends on its ability to enable and improve CE activities. With
capabilities, translating infrastructure flexibility, information col- enhanced IT-enabled CE, firms can benefit from improved new
lecting and sharing capacities, communication channels, and product development processes and more effective business
integration abilities into business outcomes. venturing and self-renewal efforts, which in turn improve
Moreover, this paper theorizes a contingent relationship product innovation performance. In light of these results,
between IT capabilities and CE activities. Specifically, the study managers should strive to channel IT capabilities toward
finds that competitive intensity augments the positive influence important entrepreneurial activities. To achieve this objective,
of IT capabilities on CE. This result suggests that IT-enabled CE IS leaders should interact closely with business executives who
activities are contingent upon the competitive conditions of the oversee and sponsor CE activities to achieve close alignment
market. In other words, while effective CE activities generally between IT and their firm’s business strategy. More efforts need
depend on strong IT capabilities, such dependence becomes more to be paid to form a shared deep understanding among both
acute when the firm operates under conditions of heightened business and IT departments about the promise of IT in
competition. In such an environment, access to relevant and supporting corporate entrepreneurial activities, such as the
timely information, the ability to share information across the development of new products, new ventures, and new markets
organization and with business partners, the capacity to or channels. Furthermore, senior management needs to explore
communicate in real time and over multiple channels, and the novel information technologies and develop IT strategies that
ability to transform and integrate disparate business units that can support the firm’s entrepreneurial abilities. IT capabilities,
are needed to conceive and execute innovative ideas are even including flexible IT infrastructure, IT integration, IT business
more important. Surprisingly, the proposed moderating role of alignment and strong IT management skills, should be developed
competitive intensity on the CE–product innovation performance to enhance the collection and sharing of customer information
relationship is not supported by the data of this study. This and preferences, communication and collaboration within and
outcome may stem from the fact that in competition-intensive across companies’ boundaries, and exploitation of market
environments, frequent changes of internal business practices intelligence to maintain firms’ environmental alertness and
are required, which tend to limit the return on CE activities agility. With more advanced consumer-oriented technologies
[30]. In particular, an intensively competitive environment can and leading web-based systems in firms, it is important to ensure
spur entrepreneurial activity but also reduce the likelihood that strong IT management skills to facilitate interaction with
firms realize benefits from entrepreneurship and innovation. The customers in innovation processes. In addition, firms need
inability to generate novel ideas and translate them into financial strong IT management skills to control security and privacy
success might counterbalance the positive increase in entrepre- issues when web-based applications and cloud computing
neurial activity, thus making the overall moderating effect technologies are increasingly implemented in the firms and
nonsignificant. increase the firms’ exposure to risk while potentially reducing
their control over certain IT resources.
5.2. Implications for practice Finally, the findings reveal that competitive intensity strength-
ens the positive influence of IT capabilities on CE activities. In
This study also has a number of important implications for particular, the results suggest that firms that operate under highly
management. First, our results demonstrate that IT capabilities competitive conditions should focus their efforts on the develop-
contribute to the product innovation performance of a firm, albeit ment and maintenance of their IT capabilities to maximize the
in a circuitous way. Executives who perceive the return on IT to be entrepreneurial return on IT investment. For example, if a firm’s
vague and inconsistent would likely see a more consistent path by industry is highly competitive (e.g., characterized by intense
focusing on IT’s role in supporting entrepreneurial and innovation promotion wars), the firm could leverage its IT capabilities to
activities. Rather than seeking to link IT directly to firm-level introduce a large number of differentiated new products to the
financial outcomes, senior management should shift their market to set itself apart from the competition by means other
attention to the salient role of IT in enabling intermediary than costs. Managers should carefully assess the external business
factors. Such a shift in perspective would be helpful for making environment’s competitive intensity to manage their IT-related
informed IT investment decisions. The elaborated role of IT in activities more effectively.
enabling firm innovation found in our study is also consistent
with the findings of the Society for Information Management’s 5.3. Limitations and future research
(SIM) 2014 IT Trends Study, which identified that the IT priorities
among IT managers have been shifted from IT impacts in Although the study reported in this paper is theoretically
increasing efficiency and reducing cost to more strategic and grounded and the results are based on a matched survey sample of
organizational issues such as innovation [36]. Recognizing the representative firms, it has several limitations that should be
role of IT in enabling innovation, senior managers should acknowledged. First, the data for the current research were
reconsider the value of IT and prioritize IT investments with obtained from manufacturing firms in Northern China, raising the
the potential to enable organizational innovation. In particular, possibility that the results may not be directly applicable to certain
more attention needs to be paid to IT resources and applications Western countries. Despite this caveat, with the exception of the
that would help to (1) collect and analyze information on the variable ‘‘ownership structure,’’ which may be unique to China,
Y. Chen et al. / Information & Management 52 (2015) 643–657 655
there appears to be no reason why the model could not be Appendix A (Continued )
applicable to other contexts. Furthermore, our model could be enior IT executive questionnaire
relevant to firms in other emerging markets (e.g., Brazil and India). IT infrastructure ITF 1: our information systems are scalable
Moreover, as more non-Chinese firms shift some of their flexibility Bhatt ITF 2: our information systems are compatible
operations to China or collaborate with Chinese business partners, et al. [8] ITF 3: our information systems are adopted to
the findings of this study could be of importance to many firms share information
ITF 4: our information systems are modular
irrespective of the physical locations of the headquarters or the
IT integration ITI 1: our firm transfers data with our suppliers
exchanges on which they are listed. Second, our data sources were Rai and Tang ITI 2: our firm connects our systems with our
drawn from manufacturing firms and the possibility of contextual [55] suppliers’ systems, which allows for the
differences suggests that the role of IT capabilities in supporting CE sharing of real-time information with our
suppliers
activities and product innovation should be examined in other
ITI 3: our firm combines information across
industries. Third, in this study, we took a matched survey sample different suppliers to support decision making
approach by asking single key informants (per occupational IT business ITA 1: IS plans reflect the business plan goals
position) to provide data for the main constructs in our model. alignment ITA 2: IS plans support the business strategies
According to established guidelines, our informants were deemed Kearns and ITA 3: IS plans recognize external business
Lederer [38] environment forces
to be capable of providing useful responses. Nevertheless, future
ITA 4: business plans refer to IS Plans
studies could consider using multi-informant designs to re- ITA 5: business plans refer to specific information
examine our model. Fourth, we adopted existing scales to measure technologies
IT capabilities as a formative second-order construct with four ITA 6: business plans have reasonable
first-order factors. Although these four dimensions of IT capabili- expectations of IS
IT management ITM 1: effectiveness of IT planning in our firm is
ties were previously used successfully and are likely to explain Bharadwaj better than that of other firms in our industry
variability in CE activities (e.g., [39,57]), future research may et al. [6] ITM 2: IT project management practices in our
extend the portfolio of IT capabilities covered in this study by firm are better than that in other firms in our
incorporating other IT capabilities. Finally, although our study industry
ITM 3: planning for security control, standard
collected data about product innovation performance one year
compliance, and disaster recovery in our firm is
after the collection of the antecedent constructs, we cannot better than that in other firms in our industry
conclude causal relationships with absolute certainty. More ITM 4: system development practices in our firm
evidence based on longitudinal research is needed to further are better than those in other firms in our
determine causation. industry
ITM 5: consistency of IT policies throughout the
enterprise in our firm is better than that in other
firms in our industry
6. Conclusion ITM 6: IT evaluation and control systems in our
firm are better than those in other firms in our
industry
This paper finds that IT capabilities positively influence a firm’s CEO questionnaire
CE and, in turn, lead to improved product innovation performance. It Corporate To what extent do you agree with the following
thus sheds light on the value of IT capabilities for CE activities and entrepreneurship statements (1 = ‘‘Strongly disagree’’ to
product innovation performance. The PLS structural equation Heavey et al. [29] 5 = ‘‘Strongly agree’’)?
New product CE1: our firm is spending heavily (well above the
modeling approach used in this study further suggests that development industry average) on product development
competitive intensity positively moderates the relationship be- CE2: our firm is introducing a large number of
tween IT capabilities and CE. Overall, this paper contributes to the new products to the market
development of more robust entrepreneurship and IT-focused CE3: our firm is acquiring significantly more
patents than its major competitors
theories and to our understanding of the business value of IT.
CE4: our firm is pioneering the development of
breakthrough innovations in its industry
Acknowledgements CE5: our firm is spending on new product
development initiatives
Business venturing CE6: our firm is entering new markets
This project was sponsored by the National Natural Science
CE7: our firm is establishing or sponsoring new
Foundation of China (no. 71273160), the Shantou University ventures
Cultivation Fund for National Programs, the European Regional CE8: our firm is finding new niches in current
Development Fund (European Union) (ECO2010-15885 and markets
CE9: our firm is changing its competitive
ECO2013-47027-P) and the Government of Spain (Research
approach (strategy) for each business unit
Projects ECO2010-15885 and ECO2013-47027-P), the Regional Self-renewal CE10: our firm is reorganizing operations, units,
Government of Andalusia (Research Project P11-SEJ-7294), the and divisions to ensure increased coordination
Campus of International Excellence BioTic of the University of and communication among business units
Granada (Research Project CEI2014-MPTIC1), and the School of CE11: our firm is redefining the industries in
which it competes
Human Resources and Labor Relations of the University of Granada
CE12: our firm is introducing innovative human
(Research Project SHRLR2015-11). resource programs
CE13: our firm is the first in the industry to
introduce new business concepts and practices
Competitive To what extent do you agree with the following
Appendix A intensity statements (1 = ‘‘Strongly disagree’’ to
Jaworski and 5 = ‘‘Strongly agree’’)?
Senior IT executives and CEO questionnaires. Kohli [33] CI1: there are many ‘‘promotion wars’’ in our
industry
enior IT executive questionnaire CI2: any product that a company can offer, others
can easily match
IT capabilities To what extent do you agree with the following
CI3: price competition is a hallmark of our
statements (1 = ‘‘Strongly disagree’’ to
industry
5 = ‘‘Strongly agree’’)?
656 Y. Chen et al. / Information & Management 52 (2015) 643–657
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