A Causal Model of Strategic Alignment and Firm Performance

Earlier studies in 1980s found no causal links between IT investments and productivity, since then a growing body of research has been investigating such links at a much finer-level of analysis. Yet the results have been inconclusive. We attribute the mixed findings to an incomplete causal chain analysis, specifically the exclusion of key constructs such as strategic alignment which would allow a better understanding of how organizations can leverage IT to positively influence firm performance. In this paper, we propose a framework that conceptualizes strategic alignment as the directional linkages between business and IT strategy, and examine how previously identified antecedent variables affect the linkages. And to complete the model, we also integrate two intermediate variables that link strategic alignment with firm performance. The framework provides insights into guiding further empirical research. For practitioners, they can use the present framework to walk through their investment decisions and understand the required resources and conditions to realize the potential values of their IT investments.