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Leveraging IT-enabled dynamic capabilities to shape business process agility and firm innovative capability: moderating role of turbulent environment

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Abstract

Today, the business environments are ever more becoming dynamic hence, firms have to be agile and innovative to respond to turbulence. Drawing on the multi-theoretic lens, this study proposes that IT-enabled Dynamic Capabilities (ITDC) are leveraged to shape firm business process agility and firm innovative capability in a turbulent environment. The 254 IT and business executives survey from Chinese firms uncover a positive and significant link in the proposed model. Marketing and technological turbulence significantly moderate ITDC–agility relationship. Similarly, marketing turbulence is significantly moderate, but contrary to the expectation the technological turbulent has an insignificant moderating effect between ITDC–firm innovative capability relationship. This study exhibits the effect of ITDC on firm performance mediated by firm agility and innovative capability. Theoretical anchoring and practical implications are also discussed.

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Notes

  1. Dynamic capability denotes the ability of a firm to extend, create, modify, and reconfigure its resource bases (Karimi-Alaghehband and Rivard 2020; Teece 2017).

  2. Firm agility includes the ability to respond and the capacity to predict opportunities and proactively act, thus firms to be effective in dynamic business environments (Ravichandran 2018).

  3. Effect Size = [R2 Interaction Model—R2 Base Model] / [1—R2 Base Model].

    Effect sizes are small if 0.02, medium if 0.15 and large if 0.35 (Cohen 1988).

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Authors and Affiliations

  1. Department of Management and Information Technology, Faculty of Management and Commerce, South Eastern University of Sri Lanka, Oluvil, Sri Lanka

    Aboobucker Ilmudeen

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Correspondence to Aboobucker Ilmudeen.

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For ease of expression, we refer to IT-enabled dynamic capabilities as ITDC and business process agility as agility.

Appendices

Appendices

1.1 Appendix A: constructs and measurement items

Measurement items with discriminant, convergent validity values

Loading

T-value

Sensing (SNS) CA  =  0.935; rho _A  =  0.937; CR  =  0.953; AVE  =  0.836

0.706

13.961

SNS 1 Scanning the environment and identifying new business opportunities

SNS 2 Reviewing our product development efforts to ensure they are in line with what the customers want

0.736

17.53

SNS 3 Implementing ideas for new products and improving existing products or services

0.791

21.428

SNS 4 Anticipating discontinuities arising in our business domain by develo** greater reactive and proactive strength

0.799

28.053

Coordinating (CRD) CA  =  0.923; rho _A  =  0.924; CR  =  0.946; AVE  =  0.813

0.82

28.014

CRD1 Providing more effective coordination among different functional activities

CRD2 Providing more effective coordination with customers, business partners and distributors

0.77

21.369

CRD3 Ensuring that the output of work is synchronized with the work of other functional units or business partners

0.821

27.358

CRD4 Reducing redundant tasks, or overlap** activities performed by different operational units

0.793

22.577

Learning CA = 0.939; rho _A = 0.939; CR = 0.956; AVE = 0.845 LRN1 Identify, evaluate, and import new information and knowledge

0.818

28.476

LRN2 Transform existing information into new knowledge

0.787

25.463

LRN3 Assimilate new information and knowledge

0.842

36.921

LRN4 Use accumulated information and knowledge to assist decision making

0.81

26.462

Integrating (INT) CA  =  0.9; rho _A  =  0.901; CR  =  0.93; AVE  =  0.769

0.764

23.045

INT1 Easily accessing data and other valuable resources in real time from business partners

INT2 Aggregating relevant information from business partners, suppliers and customers. (e.g. operating information, business customer performance)

0.786

26.978

INT3 Collaborating in demand forecasting and planning between our firm and our business partners

0.798

27.824

INT4 Streamlining business processes with suppliers, distributors, and customers

0.756

22.571

Reconfiguring (RCF) CA  =  0.903; rho _A  =  0.906; CR  =  0.932; AVE  =  0.775

0.801

28.256

RCF1 Adjusting for and responding to unexpected changes easily

RCF2 Easily adding an eligible new partner that you want to do business with or removing ones that you have terminated your partnership

0.717

17.655

RCF3 Adjusting our business processes in response to shifts in our business priorities

0.817

30.766

RCF4 Reconfiguring our business processes in order to come up with new productive assets

0.8

27.068

Business process agility CA  =  0.912; rho _A  =  0.914; CR  =  0.928; AVE  =  0.619

0.821

33.345

BPA1 Respond to changes in aggregate consumer demand

BPA2 Customize a product or service to suit an individual customer

0.732

20.055

BPA3 React to new product or service launches by competitors

0.838

34.656

BPA4 Introduce new pricing schedules in response to changes in competitors’ prices

0.754

20.791

BPA5 Expand into new regional or international markets

0.77

25.643

BPA6 Change the variety of products/services available for sale

0.82

30.343

BPA7 Adopt new technologies to produce better, faster and cheaper products and services

0.796

26.505

BPA8 Switch suppliers to avail of lower costs, better quality, or improved delivery times

0.755

19.667

Market turbulence CA  =  0.785; rho _A  =  0.787; CR  =  0.861; AVE  =  0.607

0.746

16.659

MT1 Our customer product preference changes quickly

MT2 Our customers looking new product/service all the time

0.806

21.349

MT3 We are witnessing there is a demand for our products and services from new customers

0.748

22.022

MT4 New customer product need differ from existing customers

0.815

29.659

Technological turbulence CA  =  0.9; rho _A  =  0.915; CR  =  0.93 AVE  =  0.769

0.898

54.704

TT1 The technology in our industry is changing rapidly

TT2 Technological changes provide big opportunities in our industry

0.902

54.245

TT3 A large number of new product ideas have been made possible through technological innovations in our industry

0.896

56.482

TT4 It is very difficult to forecast where the technology in our industry will be in the next 2 to 3 years

0.809

21.471

Firm innovation capability CA  =  0.931; rho _A  =  0.932; CR  =  0.943; AVE  =  0.676

0.812

29.619

FIC1 Our knowledge and skill base is building up at the right pace

FIC2 Our firm management actively seeks innovative ideas

0.808

26.443

FIC3 Our firm frequently tries out new ideas

0.78

21.208

FIC4 Our firm is often first to market with new products and services

0.858

41.288

FIC5 Our firm is able to identify and create new value for customers

0.849

35.316

FIC6 Our firm encourage creativity and invest substantial investment in R&D

0.84

25.335

FIC7 Our firm is creative in its operating methods

0.829

31.562

FIC8 Our new product introduction has increased during the last five years

0.797

22.803

  1. CA Cronbach's Alpha, CR Composite Reliability, AVE Average Variance Extracted; All loadings are significant at α = 0.001

1.2 Appendix B: multicollinearity diagnostics and path weights of first-order constructs on the second-order construct.

Second-order construct

First-order construct

Firm performance

Weight

STDEV

T statistics

VIF

Item

Weight

Loading

STDEV

T statistics

FR

0.376

0.010

37.420

2.504

FR1

0.435

0.958

0.136

3.198

     

FR2

0.493

0.907

0.129

3.726

     

FR3

0.514

0.970

0.127

4.042

OE

0.353

0.012

29.008

3.239

OE1

0.348

0.934

0.077

4.527

     

OE2

0.390

0.940

0.077

5.076

     

OE3

0.332

0.9282

0.077

4.304

MP

0.374

0.010

38.506

2.558

MP1

0.506

0.945

0.098

5.140

     

MP2

0.485

0.858

0.103

4.683

     

MP3

0.478

0.940

0.109

4.369

ITDC

         

Sensing (SNS)

0.221

0.009

24.472

2.250

     

Coordinating (CRD)

0.236

0.008

30.835

3.255

     

Learning (LRN)

0.243

0.008

29.281

3.018

     

Integrating (INT)

0.219

0.007

30.034

3.204

     

Reconfiguring (RCF)

0.222

0.009

24.475

3.226

     
  1. FR financial return, OE operational excellence, MP marketing performance
  2. All weights are significant at α = 0.01

1.3 Appendix C PLS item to construct cross loadings

0

SNS

CRD

LRN

INT

RCF

BPA

MT

TT

FIC

FR

OE

MP

SNS1

0.892

0.57

0.589

0.512

0.537

0.392

0.176

0.263

0.377

0.203

0.256

0.27

SNS2

0.935

0.591

0.592

0.541

0.575

0.386

0.177

0.29

0.366

0.155

0.204

0.214

SNS3

0.931

0.65

0.655

0.616

0.632

0.372

0.239

0.267

0.344

0.149

0.184

0.2

SNS4

0.899

0.695

0.66

0.623

0.636

0.44

0.259

0.274

0.402

0.227

0.268

0.287

CRD1

0.636

0.902

0.74

0.671

0.665

0.338

0.229

0.185

0.389

0.214

0.29

0.273

CRD2

0.598

0.901

0.654

0.629

0.61

0.343

0.203

0.209

0.395

0.258

0.299

0.274

CRD3

0.642

0.914

0.68

0.68

0.698

0.415

0.25

0.278

0.397

0.258

0.324

0.306

CRD4

0.603

0.89

0.685

0.674

0.647

0.306

0.248

0.164

0.369

0.191

0.283

0.248

LRN1

0.633

0.701

0.929

0.652

0.654

0.423

0.256

0.254

0.436

0.264

0.332

0.296

LRN2

0.587

0.69

0.911

0.639

0.606

0.411

0.264

0.312

0.434

0.218

0.287

0.305

LRN3

0.655

0.737

0.931

0.669

0.69

0.405

0.263

0.266

0.42

0.244

0.277

0.278

LRN4

0.638

0.685

0.907

0.646

0.663

0.434

0.279

0.21

0.4

0.221

0.301

0.316

INT1

0.531

0.65

0.642

0.866

0.665

0.373

0.257

0.226

0.388

0.184

0.222

0.255

INT2

0.584

0.639

0.642

0.891

0.69

0.411

0.266

0.187

0.418

0.187

0.249

0.283

INT3

0.561

0.66

0.613

0.909

0.752

0.415

0.306

0.197

0.44

0.238

0.278

0.312

INT4

0.53

0.634

0.589

0.841

0.717

0.393

0.303

0.221

0.426

0.22

0.316

0.278

RCF1

0.609

0.618

0.652

0.72

0.894

0.454

0.297

0.277

0.447

0.224

0.31

0.296

RCF2

0.496

0.578

0.554

0.65

0.847

0.413

0.238

0.279

0.397

0.223

0.276

0.187

RCF3

0.575

0.71

0.643

0.757

0.893

0.459

0.284

0.245

0.441

0.25

0.316

0.243

RCF4

0.613

0.647

0.649

0.703

0.886

0.414

0.259

0.28

0.42

0.206

0.303

0.272

BPA1

0.374

0.318

0.353

0.364

0.373

0.816

0.405

0.53

0.47

0.414

0.385

0.423

BPA2

0.305

0.278

0.351

0.358

0.395

0.726

0.425

0.426

0.449

0.423

0.368

0.38

BPA3

0.354

0.289

0.359

0.365

0.39

0.838

0.431

0.411

0.475

0.486

0.449

0.473

BPA4

0.231

0.229

0.294

0.294

0.326

0.755

0.36

0.355

0.443

0.375

0.38

0.427

BPA5

0.31

0.218

0.265

0.246

0.312

0.772

0.315

0.458

0.41

0.428

0.374

0.38

BPA6

0.356

0.291

0.355

0.348

0.381

0.824

0.42

0.377

0.514

0.452

0.462

0.51

BPA7

0.396

0.404

0.438

0.443

0.436

0.802

0.333

0.289

0.593

0.466

0.541

0.548

BPA8

0.394

0.402

0.43

0.418

0.491

0.753

0.322

0.404

0.47

0.41

0.413

0.398

MT1

0.035

0.066

0.151

0.135

0.132

0.396

0.745

0.49

0.251

0.219

0.151

0.219

MT2

0.117

0.152

0.148

0.224

0.207

0.331

0.806

0.459

0.28

0.172

0.125

0.15

MT3

0.314

0.346

0.328

0.335

0.331

0.402

0.749

0.362

0.4

0.228

0.295

0.261

MT4

0.229

0.203

0.243

0.288

0.261

0.351

0.815

0.349

0.342

0.148

0.201

0.192

TT1

0.248

0.153

0.211

0.192

0.239

0.435

0.484

0.898

0.337

0.221

0.185

0.215

TT2

0.318

0.237

0.297

0.24

0.31

0.464

0.479

0.902

0.336

0.219

0.153

0.217

TT3

0.248

0.246

0.26

0.237

0.28

0.503

0.465

0.896

0.355

0.299

0.225

0.226

TT4

0.234

0.166

0.218

0.145

0.241

0.387

0.424

0.809

0.186

0.157

0.107

0.118

FIC1

0.365

0.403

0.456

0.427

0.423

0.513

0.373

0.336

0.805

0.466

0.525

0.487

FIC2

0.328

0.345

0.386

0.379

0.38

0.461

0.326

0.289

0.804

0.442

0.535

0.464

FIC3

0.307

0.336

0.387

0.392

0.406

0.518

0.37

0.193

0.779

0.462

0.538

0.538

FIC4

0.351

0.397

0.413

0.421

0.388

0.491

0.384

0.27

0.861

0.537

0.558

0.579

FIC5

0.351

0.36

0.386

0.418

0.39

0.558

0.396

0.408

0.848

0.538

0.512

0.514

FIC6

0.338

0.316

0.336

0.374

0.385

0.465

0.277

0.227

0.847

0.577

0.602

0.549

FIC7

0.324

0.386

0.381

0.411

0.467

0.504

0.332

0.288

0.827

0.496

0.596

0.484

FIC8

0.309

0.28

0.274

0.312

0.347

0.504

0.275

0.311

0.804

0.581

0.595

0.534

FR1

0.207

0.261

0.246

0.251

0.268

0.531

0.219

0.24

0.608

0.95

0.737

0.631

FR2

0.201

0.235

0.269

0.234

0.224

0.52

0.261

0.253

0.567

0.949

0.672

0.624

FR3

0.165

0.233

0.222

0.19

0.24

0.521

0.231

0.255

0.606

0.956

0.743

0.635

OE1

0.226

0.311

0.281

0.276

0.321

0.502

0.242

0.175

0.663

0.723

0.936

0.679

OE2

0.263

0.338

0.354

0.327

0.341

0.528

0.257

0.203

0.631

0.701

0.934

0.727

OE3

0.209

0.282

0.277

0.246

0.298

0.481

0.221

0.171

0.606

0.689

0.933

0.722

MP1

0.274

0.318

0.293

0.299

0.235

0.533

0.255

0.211

0.575

0.642

0.713

0.925

MP2

0.232

0.266

0.288

0.299

0.279

0.499

0.218

0.19

0.537

0.577

0.663

0.924

MP3

0.23

0.264

0.32

0.296

0.279

0.538

0.272

0.227

0.639

0.617

0.731

0.928

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Ilmudeen, A. Leveraging IT-enabled dynamic capabilities to shape business process agility and firm innovative capability: moderating role of turbulent environment. Rev Manag Sci 16, 2341–2379 (2022). https://doi.org/10.1007/s11846-021-00501-9

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