Contrasting IT Capability and Organizational Types: Implications for Firm Performance

The Resource-Based View (RBV) has become one of the most popular ways to examine the impact of IT on firm performance. An increasing number of researchers are using the theoretical underpinning of the RBV to ground their research in investigating this relationship. This paper follows in this tradition by developing multidimensional measures for two dimensions of IT capability, inside-out IT capability and spanning IT capability. In this regard, the authors relate these dimensions to firm performance as profit ratios and cost ratios. Inside-out capability is the IT resources deployed from inside the firm in response to market requirements and opportunities. However, spanning IT capability involves both internal and external analysis and is needed to integrate the firm’s inside-out and outside-in IT competences. This study also makes an exploratory comparative assessment of the relative impact of inside-out IT capability and spanning IT capability, while analyzing the differences on the impact of IT capability in diverse types of organizations. Finally, the authors give evidence that different dimensions of IT capability may have different effects on performance measures.