Impact of IT governance mechanisms on organizational agility and the role of top management support and IT ambidexterity

Highlights

• Top management support positively influences organizational agility through the dual mediation of process-based and relational governance and IT exploration and exploitation.

• Process-based and relational governance have a direct effect on IT exploration and exploitation, whereas they have an indirect effect on organizational agility through IT exploration and exploitation, respectively.

• Apart from the direct positive relationship with organizational agility, both IT exploration and exploitation have a mediating effect between process-based and relational governance in organizational agility.

Abstract

Organizations have increasingly relied on information technology (IT) to remain agile in today’s business environment. This study examines the antecedents of organizational agility by integrating top management support, IT governance mechanisms (i.e., structural, process-based, and relational governance), and IT ambidexterity (i.e., IT exploration and exploitation) into a research model. We test our model using statistical data collected from 326 firms in China. Our findings indicate that top management support positively influences structural, process-based, and relational governance. Results show that process-based and relational governance positively influence IT exploration and exploitation, whereas IT exploration and exploitation positively influence organizational agility. In addition, top management support positively impacts organizational agility through the dual mediation of process-based and relational governance and IT exploration and exploitation. We interpret and discuss these findings as well as their theoretical and practical implications.

Introduction

Firms today face rapid market changes that require them to adjust their strategies and actions quickly. Thus, organizational agility has become an important ability in the survival and growth of contemporary firms (Felipe et al., 2016). Recent empirical studies have indicated that organizational agility can promote firm performance significantly and is also a crucial means to improve the competitive advantage of firms (Chen et al., 2014, Ashrafi et al., 2019). Although a growing body of information systems (IS) literature explored the role of organizational agility in improving firm performance (Tallon et al., 2019), research on IT resources and capabilities that enable firms to be agile in a fast-changing market is nascent.

Creating agility through IT is a long-term process and a difficult task for any firm (Lowry and Wilson, 2016), because a variety of IT-related capabilities are needed (Queiroz et al., 2018). IT ambidexterity has been identified as one of the most fundamental capabilities that can effectively enhance organizational agility (Lee et al., 2015, Gregory et al., 2015). It refers to a firm’s ability to simultaneously explore new IT resources (i.e., IT exploration) and exploit current IT resources (i.e., IT exploitation) (Lee et al., 2015). IT exploration and exploitation can complement each other; thus, ensuring that current and future viability becomes crucial to the improvement of organizational agility (Nwankpa and Datta, 2017). Moreover, IT governance provides an effective instrument by which firms can sufficiently leverage IT resources and practices to improve organizational agility (Wu et al., 2015, Gregory et al., 2018). The respective impacts of IT ambidexterity and IT governance on organizational agility have been established in previous literature (Zhou et al., 2018, Gregory et al., 2018), yet there remains a research gap explaining whether a firm’s IT governance relate to IT ambidexterity, which, in turn, impacts organizational agility and drives a firm’s strategy.

IT governance is defined as “the decision rights and accountability framework deployed through a mix of structural, processual, and relational mechanisms and used to ensure the alignment of IT-related activities with the organization’s strategy and objectives” (Gregory et al., 2018). To implement IT governance effectively, a set of mechanisms is required to assure the alignment of IT-related activities and organizational strategy (Wu et al., 2015), which are the joint responsibility of the top management team (TMT) (including the CEO, CIO, and IT managers) (Turel et al., 2019, Feng and Wang, 2019). Top management support contributes to the building and strengthening of structural, process-based, and relational governance mechanisms for facilitating IT-related capabilities (Lunardi et al., 2014, Joshi et al., 2018). For example, top management support can motivate and inspire other managers and employees to resolve conflicts and rebalance powers in IT-related activities (Shao et al., 2017). However, limited research has examined if and how top management support influences IT governance mechanisms.

Although IT ambidexterity is at the core of organizational agility (Lee et al., 2015), IT governance is needed to help translate IT resources into IT-related capability (Gregory et al., 2018). However, the link between IT ambidexterity and IT governance is inconclusive. In addition, to implement IT governance, a set of IT governance mechanisms is required to assure the alignment of IT-related activities and organizational strategy (Wu et al., 2015), which needs the support of TMT to coordinate the relationship between various IT-related activities (Shao et al., 2017). Little is known about whether a firm’s top management support affects IT governance mechanisms. Therefore, a gap in the literature exists regarding the joint effect of top management support, IT governance mechanisms, IT ambidexterity, and organizational agility. Given the possible link between top management support and IT governance mechanisms and the interrelationships among these constructs, we develop a theoretical model integrating them. Understanding the additional factors that influence organizational agility can provide academics and practitioners an improved instrument that addresses agility issues and increases a firm’s nimbleness.

This study aims to achieve three objectives. First, we explain the joint effect of top management support and IT governance mechanisms on IT exploration and exploitation in facilitating the process of organizational agility, which is beneficial to identify different IT-related capabilities that determine organizational agility. Second, we test the links between three types of IT governance mechanisms and IT exploration and exploitation to extend our understanding of the mechanisms through which firms become ambidextrous. Third, we examine how IT exploration and exploitation impact organizational agility to develop a better understanding of how to leverage IT resources effectively. Therefore, we build and test a comprehensive research model that considers top management support, IT governance mechanisms, IT ambidexterity, and organizational agility.

The rest of this paper is organized as follows. Section 2 introduces the theoretical background. Section 3 describes the research model and explains the research hypotheses. Section 4 describes the research methodology, followed by data analysis and explanation of research findings in Section 5. Section 6 discusses the theoretical and practical implications of our findings. Finally, Section 7 summarizes the conclusions and limitations and provides future study directions.