IT Capabilities, Process-Oriented Dynamic Capabilities, and Firm Financial Performance

Research Article Gimun Kim Konyang University [email protected] Bongsik Shin San Diego State University [email protected] Kyung Kyu Kim Yonsei University [email protected] Ho Geun Lee Yonsei University [email protected] More and more publications are highlighting the value of IT in affecting business processes. Recognizing firmlevel dynamic capabilities as key to improved firm performance, our work examines and empirically tests the influencing relationships among IT capabilities (IT personnel expertise, IT infrastructure flexibility, and IT management capabilities), process-oriented dynamic capabilities, and financial performance. Processoriented dynamic capabilities are defined as a firm’s ability to change (improve, adapt, or reconfigure) a business process better than the competition in terms of integrating activities, reducing cost, and capitalizing on business intelligence/learning. They encompass a broad category of changes in the firm’s processes, ranging from continual adjustments and improvements to radical one-time alterations. Although the majority of changes may be incremental, a firm’s capacity for timely changes also implies its readiness to execute radical alterations when the need arises. Grounded on the theoretical position, we propose a research model and gather a survey data set through a rigorous process that retains research validity. From the analysis of the survey data, we find an important route of causality, as follows: IT personnel expertise  IT management capabilities  IT infrastructure flexibility  process-oriented dynamic capabilities  financial performance. Based on this finding, we discuss the main contributions of our study in terms of the strategic role of IT in enhancing firm performance.