Environmental Uncertainty and Firm Performance: an Empirical Study with Strategic Alignment in the Healthcare Industry

The healthcare industry is presently using information technology to transform itself. New strategies and tactics to increase efficiency and quality through the use of IT are being developed and implemented. Through this process, firms have to adapt to environment properly for their survival because environmental uncertainty can become either crises or opportunities and understanding environment is a pre-requisite to strategic settings. Despite these implications, little studies have been done with the nature of uncertainty of environment. In this study, we extend the concept of uncertainty to complexity-change and three types of uncertainty (state, effect, and response), and examine the relationship between the types of uncertainty and strategy, the impact of the fit between uncertainty and strategy on firm performance, and CEOs’ attention to environment with information systems in the health care industry. Using 10-k documents of firms, we find that the degree of uncertainty is associated with strategic positions between efficiency-oriented strategy and market-oriented strategy, and state uncertainty dominantly affects strategic positions. We also find that the fit between state uncertainty and efficient-oriented strategy has a positive relationship with firm performance. We do not support the moderate role of information systems between uncertainty and strategy. Finally, we find that unbalanced attention of CEOs on external environment has a positive association with firm performance. The empirical results shed light not only on the understanding of characteristics of environmental uncertainty, but also on the designing of information systems to handle different types of environmental uncertainty.