Improving Strategic Flexibility with Information Technologies: Insights for Firm Performance in an Emerging Economy

Abstract

As the business environment becomes more turbulent, firms ponder how to become more flexible in reallocating or reconfiguring resources, processes, and strategies to respond more efficiently and effectively. In this context, the question of whether and how information technology (IT) can support strategic flexibility remains unresolved. This paper theorizes that firms that use IT to support core competencies will experience improved strategic flexibility, which may enhance their performance. It further theorizes that these effects are contingent on the form and nature of the firm's IT infrastructure, as well as its type of ownership - state-owned or private. Using data from a matched survey of IT and business executives in 148 Chinese manufacturing firms, we reveal positive, significant links between IT support for core competencies and strategic flexibility, and between strategic flexibility and firm performance. The findings further show that the effect of IT support for core competencies on performance is partially mediated by strategic flexibility, and that IT infrastructure positively moderates the link between IT support for core competencies and strategic flexibility. We also demonstrate that state-owned firms are less likely to apply IT applications to collect and analyse market information and thus surrender opportunities for achieving strategic flexibility and stronger firm performance.