The Role of Innovative Climate in the Relationship between Sustainable IT Capability and Firm Performance

Abstract

Information Technologies (IT) and IT-based capabilities represent a sovereign approach to firm survival and success in today’s business environment. The reflections of information technologies on company performance has always been a controversial topic in the management literature. As previous studies examining these kinds of relationships reported mixed results in terms of information technologies efficiency paradox, scholars are still trying to specify the underlying mechanisms and organizational factors linking IT to financial performance. Building on the resource-based view and positioning theory, this paper focuses on sustainable IT capabilities to generate value from IT investments. Moreover, the conflicting results regarding the effects of IT on firm performance lead to questions such as what sort of organizational contexts influence IT usage and enable firms to achieve business goals. This study considers IT capability as a three-dimensional construct—managerial IT capability, technical IT capability, and human support—and investigates the effects of sustainable IT capability on firm performance as well as analyzing the moderating effect of innovative climate. By studying the data from 221 managers of IT companies listed in the top 500 list of Information and Communication Technologies Authority (ICTA), we found that: (1) managerial and technical IT capabilities have significant and positive effects on quantitative performance, all aspects of IT capability—managerial IT capability, technical IT capability, and human support—are significantly and positively associated with qualitative performance, and (2) the relationship between technical IT capability and quantitative performance becomes stronger when the organizational climate is more innovation-oriented. (3) Similarly, the relationship between managerial and technical IT capabilities and qualitative performance becomes even stronger when the organizational climate is more innovative. The study concludes with a discussion of the theoretical and managerial implications.