Impact of IS Capabilities on Firm Performance: The Roles of Organizational Agility and Industry Technology Intensity

Drawing on the information technology (IT)-enabled capabilities perspective, this study develops a model that extends our knowledge of the mechanisms through which IT contributes to business value. Specifically, we provide new insights to the stream of research that proposes organizational agility to be a higher order capability enabled by information systems (IS) capabilities that impacts firm performance, and we test the contingency effect of an important environmental factor-the technology intensity of the industry. To empirically study the proposed relationships, data were collected from 153 Spain-based firms and analyzed using a partial least squares structural equation modeling. The results indicate that IS capabilities positively affect firm performance through the full mediation of organizational agility. Furthermore, a multigroup analysis reveals that the impact of IS capabilities on organizational agility is greater for companies in high-tech intensity industries than for those in medium-tech intensity industries. An important implication is the identification of some capabilities that might jointly enhance firm performance through their interplay, as well as the external environmental factors that influence these relationships. When designing firms' IT strategies, managers seeking to optimize firm performance should embed appropriate IS capabilities into the key business processes to enable an agile response in the organization.