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How information system

capability affects e-business
information technology strategy
implementation

Information
system
capability
197

An empirical study in Taiwan

Chi-Hung Yeh, Gwo-Guang Lee
Department of Information Management,
National Taiwan University of Science and Technology, Taipei, Taiwan, and

Jung-Chi Pai
Department of Business Administration,
Takming University of Science and Technology, Taipei, Taiwan
Abstract
Purpose The primary purpose of this study is to examine the effect that information system
capability had on e-business information technology (IT) implementation strategy; and to understand
how the quality of the implementation process for IT strategy could affect e-business performance.
Design/methodology/approach This study performed a survey of chief information officers
from 1,000 major firms in Taiwan. Structural equation modelling (SEM) was used to test for the
validity of research hypotheses.
Findings Results showed that the capability of information systems could have a direct and
significant effect on the quality of IT strategy implementation, and how the quality of this process
could affect e-business performance.
Research limitations/implications Every organization hopes to improve corporate
competitiveness and transform its enterprise through the effective implementation of IT strategy.
This study examined how information systems capability could affect the implementation of
enterprise IT strategy. However, since large firms in Taiwan are the primary research subjects of this
study, the conclusions may not be applicable to enterprises in different countries or cultures. Future
studies could examine the subject from the three aspects of technology, organization, and environment
to understand the effect that each of these aspects has on e-business information systems capability.
Practical implications With the rapid development of information technology, the introduction of
innovative strategy dealing with IT has become an important topic of research, and has become a focus
in the era of e-business. As a result, organizations feel it is important to discover the shortcomings in
information system capability factors that must be improved from the individual, group, or organization
levels, and develop appropriate implementation frameworks for IT strategy based on this foundation.
Originality/value This study uses empirical analysis to examine the effect that the capability of
information systems has on the quality of implementation of IT strategy. A compilation of relevant
literature showed that most studies have focused on conceptual frameworks or have examined the
question of IT strategy from the level of technology. Few studies have examined the effect that
information system capability has on IT implementation strategy. Therefore, the results and findings of
this study could provide an important reference for IT strategy implementation, in the era of e-business.
Keywords E-business, Electronic commerce, Information technology strategy implementation,
Information system capability, Information systems
Paper type Research paper

Business Process Management

Journal
Vol. 18 No. 2, 2012
pp. 197-218
q Emerald Group Publishing Limited
1463-7154
DOI 10.1108/14637151211225171

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198

Introduction
With groundbreaking innovation in information technology (IT) and rapid development
of information systems (ISs), companies have begun emphasizing the development of
e-business strategies; and experts and researchers have introduced strategic planning
methods relevant to e-business. For example, Hooft and Stegwee (2001) introduced a
method for developing e-business strategy, which involves an alignment model as a base
for strategic planning of ISs. The model has a number of stages including: depicting a
vision of e-business, strategic formation, finding fields for e-business applications,
combining electronic application systems, and formulating e-business plans. Li and
Chang (2004) introduced an integrated framework for e-business, emphasizing that
e-business should be holistic, dynamic, and dialectical. Many firms have introduced
innovative IT strategies and e-business applications to improve competitiveness
and transform their enterprises (Pai and Yeh, 2008). As a result, the development and
implementation of IT strategy has become a focus for information management in
industry and academia (Gottschalk, 1999; Teo and Ang, 2001; OBrien, 2004; Lapointe
and Rivard, 2005; Khazanchi, 2005).
Gottschalk (1999) suggested IT strategy include plans to develop projects for IT
applications, to help organizations to realize their goals. Salmela and Spil (2002) noted
that, with continual innovation in new technologies, alignment between IT strategy
and corporate strategy has become more difficult than previously, even though the
process of planning remained the same as in the past. If a company has a well-planned
IT strategy, it can improve its overall competitiveness to integrate corporate strategy
and IT implementation effectively (Yrle et al., 2004). However, Kalakota and Robinson
(1999) suggested that although many enterprises have solid plans for their ISs, few are
able to convert these strategies into action. Even if high-level managers found
opportunities to apply e-business applications, enterprises would need the ability to
implement IT strategy effectively (OBrien, 2004). Amit and Schoemaker (1993) noted
that capability referred to the ability of an enterprise to use corporate processes for
the allocation and use of resources. Collis (1994) suggested that capability involved
socially complex routines and determined the efficiency of an enterprise in converting
inputs to outputs. Capability could also be viewed as having the resources required to
complete a particular task or activity (Grant, 1991; Amit and Schoemaker, 1993).
Barney (1991) viewed capability as an organizational characteristic allowing
organizations to devise, select, and implement strategies. If an organization lacked
sufficient organizational or ISs capability, its implementation of IT strategy would
suffer adverse effects. Many studies have shown that organizations emphasize the use
of strategic planning for ISs to guide the production of IT strategies. However, these IT
strategies are rarely implemented effectively. Researchers have begun discussing
issues of relevance with regard to the importance of IT strategy implementation
(Gottschalk, 1999; Teo and King, 2001; Salmela and Spil, 2002; McNish, 2002), and this
study collected and compiled a great deal of this relevant literature. Primary research
motivations were based on the following points: first, the implementation of IT
strategy is a topic of focus in information management for industry and academia;
second, capability is an important organizational resource; and third, few studies have
examined the implementation of IT strategy from the perspective of IS capability.
This paper first examined the implications of implementing IT strategy, and then
explored existing studies and applications relevant to IS capability to discover

associations linking IScapability and the quality of IT strategy implementation. In the

data analysis methodology of this study, confirmatory factor analysis (CFA) was used
for the measurement model to test for reliability and validity of the scale. A structural
model was used to test for the reasonableness of research hypotheses and research
model. Finally, this paper discussed research conclusions and suggestions.
Literature review
Implementation of IT strategy
The objective of IT strategy is to establish a mid- to long-term plan for introducing ISs
and to coordinate relevant IT investments. Plans describe information resources, human
resources, organizational management, and topics relevant to the introduction of ISs
(Powell and Micallef, 1997). In the past, enterprises usually used a methodology for
developing ISs strategies to devise ISs and IT strategies. For example, Pun and Lee
(2000) developed a five-stage strategic IS management model, including the formation of
strategies for enterprises to find strategic opportunities to use ISs, system framework
design, establishment and implementation of systems, and assessment of the effect of
strategic ISs on competitiveness. Ward and Peppard (2004) introduced a conceptual
framework for information systems strategic planning (ISSP). Their framework
addressed three aspects for the process of ISSP, including ISs strategy, IT strategy, and
information management strategy. Chan (2005) introduced a corporate framework for
development ISs strategies and plans. This framework was based primarily on the
integration of business needs and value chain optimization. Scope of e-business includes
e-commerce, enterprise resource planning (ERP), supply chain management, customer
relationship management, knowledge management, etc. Therefore, when implementing
e-business, the firms should consider their core capability and internal resources, as well
as have complete IT strategy planning and implementation in order to enter new
economic era (Patel and McCarthy, 2000; Daghfous and Al-Nahas, 2006). When
introducing e-business, firms effective implementation of e-strategy, as well as its
modification of the outcome to meet the environmental change, is critical (Sharma and
Gupta, 2004; Vega et al., 2008). It can be seen from investigations performed by
researchers that many enterprises developed solid plans for IT strategy, but were unable
to implement them, which led to poor overall organizational performance (Bharadwaj,
2000; Peppard and Ward, 2004; Ravichandran and Lertwongsatien, 2005).
Sambamurthy et al. (1993) suggested that, in addition to reflecting the information
needs of an organization, IS planning has the more important objective of ensuring the
commitment of high-level management to IS implementation. Cerpa and Verner (1998)
noted that continuously assessing plans for IS strategy was an important topic in ISSP,
to ensure that plans could be implemented and achieve the expected results. Gottschalk
(1999) used investigative research methods to find predictive factors for the
implementation of IT strategy. Results of our research suggested that user
participation and responsibility for the implementation of IT strategy were the most
important factors influencing IT strategy implementation. Teo and Ang (2001)
noted that IS planning included the three stages of initiation, plan development, and
implementation. In the implementation stage, problems related to planning IS
strategy included difficulty in receiving commitment from high-level management for
implementation of IS strategy, overlooking plans for the IS that had already been
developed, and a failure to use plans for IS as a standard for assessing

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management performance. Salmela and Spil (2002) emphasized the importance of

strategic implementation presenting the formation of IS strategy and implementation
methods in four cycles. In summary, it is necessary to have complete plans covering ISs
strategy for IT; however, effective implementation of IT strategy is also necessary to
help e-business achieve strategic objectives. As a result, improving the implementation
of e-business IT strategy and finding factors that affect the quality of IT strategy
implementation are important subjects for study.
IS capabilities
According to resource-based view (RBV), enterprises are viewed as the combination of
assets and capabilities. Competitive advantage is obtained through the accumulation of
strategic assets and capabilities (Barney, 1991). RBV suggests that enterprises possess
unique assets and capabilities, allowing them to control their competitive advantage
within the same field. All successful enterprises have some unique resources and
capabilities; as long as they are used effectively, the organizations will grow and create
positions for themselves in the market (Barney, 1991). Ciborra (1994) noted that, in
dynamic environments, confirming organizational IS capabilities and IT infrastructure
could be more should be a higher priority than merely selecting combinations of IS
applications. Enterprises must be capable of implementing IT strategy and must devote
adequate resources to the implementation of IT strategy to ensure that their plans can be
implemented effectively (Earl, 1989). Fenny and Willcocks (1998) noted three continuous
challenges for IT enterprises to heed, such as business and IT vision, design of IT
architecture, and delivery of IS services. ISs capability is closely related to these three
challenges. Sabherwal (1999) noted that higher ISs capability lead to improvements in ISs;
and lowering organizational systems capabilities reduced the chance that an IS, would
succeed. An organization which uses IT to strengthen its competitive advantage must
develop effective IS capability (Ross et al., 1996). Bharadwaj (2000) viewed IT as an
important capability of the organization and used empirical methods to explore the
relationship between IT capability and enterprise performance. In a study that tested a
model describing the relationship between IT capability and business performance,
Sanders and Premus (2005) noted that IT capability had a significant effect on business
performance. Ravichandran and Lertwongsatien (2005) believed that enterprises with
higher IS capability were able to deliver IT services to the entire organization. Regarding
e-business, according to future development direction and competition trend, the firms
plan proper e-strategy. The implementation of strategy is related to the change of market,
but also IT capability of the whole organization. Therefore, development of organizational
IT capability is one of the critical tasks of e-business (Eikebrokk and Olsen, 2007;
Patrakosol and Lee, 2009). The results described by the scholars above are indicative of the
effect that ISs capability can have on an organizations competitive advantage, core
competence, and business performance. However, investigative studies examining the
quality of IT strategy implementation focusing on ISs capability remain rare. As a result,
this study combines the measurements of IS capability, IT strategy implementation, and
e-business performance conducted by various researchers to perform empirical research.
Research model and hypotheses
Peppard et al. (2000) introduced the conceptual framework to determine IS capabilities,
including strategy, definition of ISs contributions, definition of IT capability,

exploitation, delivery of solutions, and supply. Peppard and Ward (2004) developed
26 items regarding organizational IS capability using six constructs as a basis for
integrating RBV. Their research emphasized the importance of IS capability for the
implementation of business IT strategy. Other researchers have examined
organizational IS capabilities from the perspectives of information resource
management, knowledge management, IT project management, and IT leadership
(Tipping and Sohi, 2003; Saini and Johnson, 2005; Khatri, 2006). The literature reveals
that a broad range of factors is covered by IS capability. When organizations initiate
e-business, they use relevant IT to coordinate the integration and information sharing
for various business functions (Langdon, 2006). In addition to project management
programs, companies must take into account the system development ability to
introduce ERP successfully; businesses must decide whether to outsource the work or
develop systems themselves (Nah and Delgado, 2006; Nah et al., 2007). Dixon (1995)
suggested that organizational learning be the learning process performed on the
individual, group, or organizational levels to regulate organizational activities and
improve organization performance. Lee and Bai (2003) suggested that when performing
ISSP in the digital era, interactive learning at the individual, group, and organizational
levels could be used to improve the effectiveness of planning. Through effective
organizational learning processes, businesses integrate the application of processes and
organizational structure broadly to create new operating models, thereby improving
innovation and response capabilities within the organization, allowing the organization
to move into e-business (Cegarra-Navarro et al., 2007). When the organization promotes
the development of e-business, it involves a type of organizational learning. For this
reason, this study compiled a number of studies regarding IS capability and e-business,
and divided IS capability into individual capability, group capability, and organization
capability. This study also combined the IS strategy-planning model of Lederer and
Salmela (1996) and the IT strategy implementation scale introduced by Gottschalk
(1999) as a theoretical basis for the research framework. At the level of individual
capability, this study examined the impact of IS/IT leadership and IT resource allocation
capability of chief information officers (CIOs) on the quality of IT strategy
implementation processes. At the level of group capability, this study examined the
effect of collaboration and knowledge sharing capability within the organization on the
quality of IT strategy implementation. At the level of organization capability, this study
examined the effect of system development capability and project management
capability on the quality of IT strategy implementation processes. Figure 1 shows the
research model of this study. Research hypotheses are discussed below.
Taylor (1997) noted that many strategies appeared only in plans and were not
implemented, preventing organizations from being able to achieve business objectives.
Teo and Ang (2001) suggested that, for Singaporean businesses, 50.2 percent of
information managers believed that the primary problem in IS planning was the fact
that developed IS were not considered a priority. OBrien (2004) suggested that
implementation is a completion of all planned items, and could be viewed as the
process of putting into practice business and IT strategies, as well as application plans.
Salmela and Spil (2002) argued that the implementation of IS plans was an important
point that should be considered in IS planning. In the long-term, effective
implementation of IT, strategies could enhance organizational operating performance.
This study presents the following research hypotheses:

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IS Capability
Individual level capability

202

IS/IT leadership
capability
H2a(+)
IT resource
allocation capability
H2b(+)

Group level capability

Collaboration
capability

H3a(+)

H3b(+)

Quality of IT Strategy
Implementation Processes

H1(+)

e-business
performance

Knowledge sharing
capability
H4a(+)
Organization level
capability

H4b(+)

System development
capability

Figure 1.
The research model

Project management
capability

H1. The quality of IT strategy implementation is positively associated with

e-business performance.
Individual level capability
Stephens et al. (1992) argued that CIOs were the senior managers responsible for IT
and IS in organizations. They played the role of combining organizational strategy
with IT applications to support company objectives. Gottschalk (2002) suggested that
CIOs are typically project managers for IS strategy planning; making them responsible
for the development of plan development and playing a critical role in the planning
process. When businesses perform IS strategy planning, the CIO has the responsibility
of helping the CEO and department heads to understand the strategic role played

by IS/IT in the competitive environment of the organization. At the same time, they
must prepare for the anticipated effects of introducing new IS/IT on the IT architecture
of the organization, giving users confidence in the MIS and producing a sense of trust
(Byrd et al., 2006). As a result, this study introduced the following research hypothesis:
H2a. CIO IS/IT leadership capability is positively associated with the quality of IT
strategy implementation.
With the promulgation of e-business and the increasing importance of IT, the
configuration of IT resources such as information hardware, application systems,
databases, and communication networks can have a significant effect on IS strategy
planning (Chan, 2005). In the process planning IS strategy, is the CIO has to plan and
ensure that IT resources are allocated appropriately. In addition, CIOs must be able to
prioritize IT investments and disseminate potential risks (Byrd et al., 2006). In
summary, CIOs must not only be able to understand the IT resource allocations of the
entire organization but also to view IT as an investment and assess the benefits for the
business. Accordingly, this study introduced the following research hypothesis:
H2b. CIO IT resource allocation capability is positively associated with the quality
of IT strategy implementation.
Group level capability
Grant (1991) suggested that the organizational capability of businesses did not lie in
individual functions, but rather in the coordination and integration of different
functions. In highly competitive environments, organizations emphasized the division of
labor and professionalization to improve overall performance, producing individual
functions and departments. However, when selfish departmentalization begins to
increase its hold across various departments, the organization is can be harmed instead.
As a result, coordinating and adjusting mechanisms to encourage cooperation between
departments is even more important in the development of e-business (Sanders and
Premus, 2005). Malone and Crowston (1994) argued that independent departments with
mutual linkages should be managed through coordination and cooperation mechanisms.
In addition to being able to control, integrate, and allocate organizational resources,
businesses with better coordination capability would be able to use their resources
appropriately in improving their organizational performance (Henderson and Cockburn,
1994). In summary, this study introduced the following research hypotheses:
H3a. Collaboration capability is positively associated with the quality of IT
strategy implementation.
When organizations engage in IS strategy planning, in addition to forming temporary
planning teams with representatives from each department, it is also possible to perform
planning by using team learning, focus interviews, and expert reports. Broader planning
methods increase the chances of success in the planning process (Premkumar and King,
1991). Pai (2006) noted that ISSP requires the integration of multiple types of IS/IT
knowledge and business knowledge, therefore knowledge sharing between planning
members is necessary. Goh (2002) noted that knowledge sharing was highly important
for the effective transfer of knowledge to the various departments of the organization.
Szulanski (1996) suggested that transferring optimized practical capabilities was

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essential in the establishment of competitive advantage for companies. To achieve IT

strategy planning objectives, knowledge sharing was highly important. Accordingly,
this study introduced the following research hypothesis:
H3b. Knowledge sharing capability is positively associated with the quality of IT
strategy implementation.

204

Organization level capability

The development of IS is a highly important task in professional IS work, and
determines the quality of IS (DeLone and McLean, 1992). When performing IS
development, organizations must develop the appropriate IS according to their need for
information and limited resources. Organizations must also consider the implications
of different factors such as overall business strategy and IT and developmental trends
(Kim and Peterson, 2001). In the developing of e-business, IS can be developed
internally or through outsourcing. Both methods have advantages and disadvantages.
Which method should be chosen is dependent on the IS development capability of each
business (Holland and Light, 1999). Therefore, this study introduced the following
research hypothesis:
H4a. System development capability is positively associated with the quality of IT
strategy implementation.
Because of the increasing complexity of IS, changes in demand and the interference of
external variables, failure is often the result in business IS projects (Bagranoff and
Brewer, 2003). As a result, implementation of project management is a critical factor for
the success of IS (Kim and Peterson, 2001). Project planning must take into account and
arrange factors holistically. Factors such as people, technologies, resources, timelines,
and risk must be prioritized to ensure that their goals can be achieved when the plans are
implemented. As a result, when businesses promote ERP, they must implement a clear
and effective project management plan (Nah et al., 2007). It can be seen that carefully
considered project management programs are critical factors in the successful
implementation of plans. Accordingly, this study introduced the following research
assumption:
H4b. Project management capability is positively associated with the quality of IT
strategy implementation.
Research methodology
Sample and data collection
This study used a list of 5,000 large enterprises (including manufacturing, services, and
financial enterprises) published by China Credit Information Service, Ltd as a source for
sampling and used the top 1,000 largest firms as survey subjects. Use of large firms as a
source for sampling was motivated primarily by the fact that the IT in larger firms tends
to be more mature than in smaller or medium-sized firms; therefore, the use of large firms
increases the validity and reliability of survey responses. To improve the survey
retrieval rate, this study included small gifts with mailed surveys. One week after
surveys were mailed, research assistants confirmed with the IT departments of
corporations whether they had received surveys and requested that surveys be filled out.
Follow-up letters were sent about three weeks after the initial mailings.

Measure development
This study used multiple-choice questions previously tested by other scholars as the
basis for survey design. In addition to basic business information, the surveys covered
three main sections: IS capability factors, IT strategy implementation, and e-business
performance. Each CIO was asked three questions concerning leadership capability
and IT resource allocation capability. Primary theories were adapted from the IT
capability that Bassellier et al. (2001) suggested business managers should possess.
Three survey questions were devoted to collaboration capability, modified from
research presented by Sander et al. (2005) on the relationships between IT capability,
collaboration, and organizational performance. Four questions were used to measure
knowledge sharing capability. These were modified from research by Lee (2001)
regarding knowledge sharing. Three survey questions were used for system
development capability, based primarily on the theory developed by Heijden (2001)
regarding the IT capability that businesses should possess in e-commerce
environments. Project management capability was measured using three survey
questions, modified from the assessment factors introduced by Nah et al. (2007) for the
successful implementation of ERP by businesses. In addition, four questions were used
to measure the quality of implementation of IT strategy, based on the implementation
measurement constructs developed by Gottschalk (1999). Gottschalk (1999) suggested
that IT strategy implementation could be measured according to the constructs of
timeline planning, budget execution, absence of deviation from the plan during
implementation, and satisfaction with implementation results. E-business performance
was measured using three survey questions, modified from a study by Sanders and
Premus (2005), which modeled the relationship among IT capability, internal and
external organizational cooperation, and business performance. The survey included
closed and open questions, depending on the type of question. For closed questions,
this study utilized the Likert five-point scale to provide a number of different
possible answers for questions. Respondents needed to select one or a number of
appropriate responses. Open questions were directed primarily towards understanding
the meanings and concepts, which businesses could not express through
multiple-choice questions, allowing respondents to express their thoughts freely.
The operationalizations of the measures are noted in the Appendix.
Pre-testing
The pre-testing process focused on instrument clarity, question wording and validity.
As a result, after the first draft of the survey had been completed, we invited three
professors and five doctoral students to evaluate the survey. We also invited IT
department managers from the manufacturing, financial, and information sectors to
evaluate the survey. Suggestions from the expert and researches were used as a basis
for correcting the survey, increasing validity and reliability.
Statistical analysis
This study utilized structural equation modeling analysis methodology to perform
CFA for the measurement models of the IS capability factor, IT implementation, and
e-business performance constructs. Structural model analysis was used to test the
reasonableness of research hypotheses and model. The statistical analysis software
used in this study was SPSS 15.0 and AMOS 7.0.

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Data analysis and results

Sample characteristics
This study utilized survey investigation methods, distributing 1,000 surveys;
191 effective samples were retrieved for a return rate of 19.1 percent. Survey
respondents were CIOs who had worked in the information field for an average of
13.8 years. These respondents came from various industries, including manufacturing
(23.04 percent), finance and insurance (17.28 percent), computer and telecommunications
(30.37 percent), and other relevant industries, such as real estate, construction,
health care, and transportation. Table I lists the respondent company characteristics,
including industry type, number of IS employees, and e-business experience.
Measure reliability and validity
To test the consistency and validity of the scales constructed in this study, this study
made use of CFA to assess the overall goodness of fit for measurement models. First,
it can be seen from the goodness of fit index (GFI) in Table II that x 2/df 1.88, GFI
and adjusted GFI (AGFI) values were 0.90 and 0.87, respectively. These values meet
the suggestion of Etezadi-Amoli and Farhoomand (1996) that these values should
exceed 0.8. The root mean square error of approximation (RMSEA) value was 0.065,
consistent with Hair et al. (1998) suggestion that the value be under 0.08. In summary,
the overall fit for the measurement model was acceptable (Bagozzi and Yi, 1988;
Chau and Hu, 2001).
In the component fit of measurement model, regression association testing was
performed in CFA for the constructs and the measurement variables to understand
whether it was appropriate for the constructs to be measured using the measurement
Demographic characteristics

Table I.
Sample characteristics

Industry type
Manufacturing
Finance/insurance
Computers/telecommunication
Transportation
Retail/wholesale
Real estate/construction
Health/foods
Utility
Others
Number of IS employees
Less than 10
11-30
31-50
51-100
Above 100
E-business experience
Less than one year
1-3 years
3-5 years
Above five years
Note: n 191

Frequency

Percentage

44
33
58
15
11
9
10
6
5

23.04
17.28
30.37
7.85
5.76
4.71
5.24
3.14
2.62

64
54
28
24
21

33.51
28.27
14.66
12.57
10.99

17
93
60
21

8.90
48.69
31.41
10.99

OPER1
OPER2
OPER3
ITSTR1
ITSTR2
ITSTR3
ITSTR4
ITLD1
ITLD2
ITLD3
ITLOC1
ITLOC2
ITLOC3
Items
COOP1
COOP2
COOP3
KS1
KS2
KS3
KS4
SD1
SD2
SD3
PM1
PM2
PM3

E-business performance

0.75
0.96
0.95
0.86
0.84
0.80
0.75
0.85
0.86
0.84
0.80
0.86
0.92
Standardized factor loadings
0.80
0.79
0.75
0.86
0.77
0.80
0.78
0.90
0.87
0.85
0.78
0.82
0.93

Standardized factor loadings

13.23 *
15.79 *

15.24 *
14.21 *

11.79 *
12.82 *
12.14 *

8.36 *
7.86 *

14.38 *
15.63 *
Convergent validity (t-statistic)

14.80 *
13.42 *

13.88 *
12.43 *
10.29 *

16.22 *
16.16 *

Convergent validity (t-statistic)

0.88

0.91

0.89

Composite reliability
0.82

0.90

0.89

0.89

0.92

Composite reliability

Composite reliability

Square of the summation of the factor loadings

Square of the summation of the factor loadings summation of error variances

Notes: Significant at: *p , 0.01, * *p , 0.05, and * * *p , 0.1; overall fits of measurement model x 2 290.82, df 155, x 2/df 1.88, GFI 0.90,
AGFI 0.87, RMSEA 0.065:

Project management capability

System development capability

Knowledge sharing capability

Constructs
Collaboration capability

IT resource allocation capability

IS/IT leadership capability

Quality of IT strategy implementation

Items

Constructs

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Table II.
Measurement model:
loadings, convergent
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variables introduced by this study. It can be seen from Table II that the regression
association between the various constructs and their measurement variables reached
significance ( p values all ,0.01), showing that the constructs had good explaining
power in terms of measurement validity. In other words, the measurement of each
construct had a certain degree of convergent validity (Bagozzi and Yi, 1988). In
measurement of reliability, Table II shows that the composite reliability of each
construct fell between 0.82 and 0.92, all surpassing the 0.70 standard; these results
indicate that the scales introduced by this study had acceptable reliability standards
(Bagozzi and Yi, 1988). Due to the discriminate validity between constructs, this study
also tested whether the correlation coefficients for the constructs were excessively
high. The correlation coefficients between constructs are shown in Table III; none of
the correlation coefficients exceeded 0.90, indicating that there was acceptable
discriminate validity between constructs (Hair et al., 1998).
Testing the structural model
This study used structural model analysis to test for the reasonableness of the research
model and hypotheses. Results from structural model analysis are shown in Table IV.
All the model-fit indices for the structural model are as shown below: x 2 261.16,
df 155, x 2/df 1.68; GFI and AGFI values are, respectively, 0.91 and 0.86; the
RMSEA is 0.064, indicating that the overall goodness of fit for the structural model was
acceptable (Etezadi-Amoli and Farhoomand, 1996; Chau and Hu, 2001). It can be seen
from the path coefficients listed in Table IV that quality of implementation of IT
strategy had a positive effect on e-business performance, supporting H1. From
Table IV and Figure 2 that H2a, H2b, H3a, H3b, H4a, and H4b also received
significant support.
Discussion
This study examined factors which affect the quality of IT strategy implementation
from the perspective of IS capability. It also considered the effect of quality on IT
Variables
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)

E-business performance
Quality of IT strategy implementation
IS/IT leadership capability
IT resource allocation capability
Collaboration capability
Knowledge sharing capability
System development capability
Project management capability

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

0.80a
0.51
0.49
0.57
0.43
0.41
0.39
0.45

0.66
0.60
0.33
0.48
0.47
0.45
0.54

0.71
0.64
0.38
0.53
0.35
0.42

0.74
0.56
0.37
0.57
0.61

0.61
0.55
0.62
0.59

0.65
0.68
0.44

0.76
0.67

0.72

Notes: Diagonals represent the average variance extracted, while the other matrix entries represent
the square correlations:
a

Table III.
Discriminate validity

Average variance extracted

Summation of the square of the factor loadings
Summation of the square of the factor loadings summation of error variances:

Hypothesis
H1. Quality of IT strategy implementation !
e-business performance
H2a. CIO IS/IT management capability ! Quality
of IT strategy implementation
H2b. IT resource allocation capability ! Quality of
IT strategy implementation
H3a. Collaboration capability ! Quality of IT
strategy implementation
H3b. Knowledge sharing capability ! Quality of
IT strategy implementation
H4a. System development capability ! Quality of
IT strategy implementation
H4b. Project management capability ! Quality of
IT strategy implementation

Path coefficient

t-value

Remarks

0.37

4.68 *

Supported

0.27

3.62 *

Supported

0.34

4.51 *

Supported

0.40

4.81 *

Supported

0.29

4.10 *

Supported

0.26

3.68 *

Supported

0.32

4.27 *

Supported

Notes: Significant at: *p , 0.01, * *p , 0.05, * * *p , 0.1; x 2 261.16, df 155, x 2/df 1.68,
GFI 0.91, AGFI 0.86, RMSEA 0.064

strategy implementation in e-business performance. Empirical results and analysis are

explained below.
Effect of IS capability factors on the quality of the IT strategy implementation process
First, in individual level capability, results show that the leadership capability and
IT resource allocation capability of CIOs have a significant effect on the quality of
IT strategy implementation. Results of this study suggest that in the process of IT
strategy planning and implementation, CIOs with better IS/IT management and IT
resource allocation capability are able to combine IT and organizational strategies, as
well as grasp and use organizational information resources to facilitate implementation
of the plan. As a result, in addition to using IT to achieve strategic business goals, CIOs
must play the role of resource planners to integrate and allocate resources to the most
important positions, gradually developing e-business. Previous studies have probed
into influences of top managers support or IT readiness on e-business performance
(Eze, 2008; Wang and Shi, 2009); however, there are scanty studies on the factors of
e-business from the perspective of CIO capability. With the prevailing application of
IT, the role of CIO in the organizations becomes more important. Thus, finding of this
study demonstrates that CIOs good IS/IT leadership and IT resource allocation
capability is the relatively important factor of successful implementation of IT strategy
for e-business.
In group-level capability, results showed that collaboration capability and
knowledge sharing capability had a significant effect on the quality of IT
strategy implementation. The research results suggested that in the process of IT
strategy implementation, cross-departmental communication, and collaboration as well
as the integration of ideas were often necessary. Thus, we can see that the collaboration
capability within an organization is highly important. These results are consistent with
the views of Handfield and Nichols (2004), who suggested that through collaboration,
e-businesses could achieve high degrees of integration between departments. In
addition, the planning and implementation of IT strategies could not be accomplished by

Information
system
capability
209

Table IV.
Hypotheses testing results

BPMJ
18,2

IS Capability
Individual level capability

210

IS/IT leadership
capability

IT resource
allocation capability

Group level capability

Collaboration
capability

Knowledge sharing
capability

0.27***

0.34***

0.40***

0.29***

Quality of IT Strategy
Implementation Processes

0.37***

e-business
performance

0.26***
Organization level
capability
0.32***
System development
capability

Figure 2.
Results of structural
model

Project management
capability

only one person. Organizations rely on the collective efforts and knowledge sharing of
members. They must also maintain continual review and improvement to achieve goals.
Pai (2006) suggested that knowledge sharing mechanisms could help planning members
to share knowledge (tacit and implicit) with each other to improve the quality of the IS/IT
Strategic Planning processes. According to past literatures, knowledge management is
the key factor of e-business (Koh and Maguire, 2004; Nadeem, 2006). Lin (2008)
suggested that knowledge acquisition and knowledge dissemination significantly
influence e-business implementation success. Result of this study further demonstrates
that group-level knowledge sharing capability in organizations significantly influences
the quality of IT strategy implementation in e-business. In comparison to studies on
influence of knowledge management on e-business, there are rare researches on effect

of collaboration capability on e-business. Therefore, the finding of this study can

complement the past literatures.
Finally, in organization level capability, the results of this study showed that system
development capacity and project management capacity had a significant effect on the
quality of IT strategy implementation. Results suggest that, in the process of developing
e-business, companies must introduce or develop different IS. At these times, the system
development capability of the overall organization is an essential factor in maintaining IS
quality. When businesses formulate their own e-business strategies, it is necessary to
assess whether they will develop electronic application systems by themselves or through
outsourcing, otherwise they could easily fall short in the achievement of their expected
results, even after investing significant labor, equipment, and funds (Finney and Corbett,
2007). As a result, businesses need good system development capability to ensure that
they can construct appropriate electronic application systems in the process of IT strategy
implementation. Organizations can use project management to define objectives for the
stages of e-business introduction, construction, testing, and evaluation; they can reduce
the risk of failure by establishing a specific, feasible implementation plan. A study by
Nah et al. (2007), investigating factors in the successful implementation of ERP by
Malaysian manufacturers, suggested that strategic objectives and scopes could be made
clear through project management programs and could help organizations to grasp
budget and timeline planning effectively, ensuring the successful implementation of ERP.
In e-business process, firms may encounter various difficulties, such as low degree of
internal cooperation, high-introduction expenditure, long-introduction scheduling, failure
in system integration or rigidity of system process. Therefore, in order to avoid the
above situations, system development capacity and project management capacity in
organizations will be important.
The effect of quality of IT strategy implementation on e-business performance
The results show that the quality of IT strategy implementation has a significant effect
on e-business performance. These results suggest that when companies develop
e-business, they take into account factors such as IT, budgeting, and resource allocation,
to achieve their strategic objectives, establish IT strategies as blueprints for overall
organizational IT architecture and references for constructing IS. As a result,
organizational competitiveness could be greatly increased if IT strategy could be
implemented effectively, thereby improving overall organizational performance.
Lederer and Salmela (1996) argued that the degree of implementation of IS strategies
was an important factor affecting IS strategy planning effectiveness. Gottschalk (1999)
suggested that even the best plans or strategies needed to be implemented effectively to
provide benefits. In e-business introduction, firms can enhance knowledge innovation,
customer relationship development and internal process by knowledge management,
organizational learning and innovation capability (Koh and Maguire, 2004; Lin, 2008).
Result of this study further demonstrates that if organizations can effectively implement
IT strategy planned, they will be able to enhance e-business performance.
Conclusions
Implications for practitioners
Thanks to the rapid development of IT and e-business strategies, the effect and
assessment of IS capability for different aspects of organizational IS management has

Information
system
capability
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212

become an important research subject in the field of information management. How to

develop IS capability and examine its effects on IT strategy and e-business strategy
effectively are now focuses of the business world. This study used the results of
empirical analysis to develop a descriptive model and describe the strategic constructs
of IT strategy implementation for businesses in Taiwan, as well as the effect of IS
capability factors on the quality of IT strategy implementation. In particular, e-business
strategies are gradually being developed by businesses, and as a result, developing an
appropriate framework for business IT strategy implementation should be a future
focus for scholars and practitioners. The results of this study could help CEOs
understand the current state of IT strategy implementation in Taiwanese businesses,
and even help businesses to examine the effect of various IS capability factors on the IT
strategy implementation process from the individual, group, and organization levels.
This information could facilitate the planning of IT strategic development by
businesses, benefiting businesses in the implementation of IT strategy in the future. The
suggestions to enhance overall operational performance in e-business are: First,
regarding individual level capability, cultivation of CIOs IS/IT leadership and IT
resource allocation capability will be urgent; second, as to group level capability,
departmental collaboration capability and knowledge sharing capability can possibly
result in knowledge innovation; thus, it should also be concerned by organizations; and
third, regarding organization level capability, system development capacity and project
management capacity are the key factors of business introduction of e-systems. In
addition, organizational performance could be significantly improved if businesses
could effectively implement IT strategy, rather than overlooking it.
Limitations and future research
The subjects of investigation in this study were located primarily in Taiwan. Whether
or not the conclusions reached in this study could be applied to businesses in other
countries or cultures remains to be seen. In addition, the subjects of research for this
study were CIOs in large businesses; whether research results could be applied to
small- and medium-sized businesses also needs to be confirmed in future research. This
study primarily used empirical methods with IS capability as a basis of its examination
of the effect on IT strategy implementation by large businesses in Taiwan region.
However, it can be seen from the theory and literature relevant to IS that many factors
affect the successful implementation of IT strategy. As a result, future studies could
examine the effect of different constructs such as technology, organization, and
environment on e-business IS capability. In addition, long-term case studies could be
performed for a number of businesses in different industries, from the perspective of IS
capability. Such studies would help to construct specific, feasible steps for the
implementation of IT strategy, providing an important reference for future
implementation of IT strategy and e-business strategy.
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Appendix. Questionnaire items
E-business performance
OPER1.

Organization can reduce operating costs.

OPER2.

Organization can shorten the time needed to respond to customers.

OPER3.

Organization can reduce the time needed to introduce new products to market.

Quality of IT strategy implementation process

ITSTR1. IT strategy and business strategy can support each other.
ITSTR2. IT strategy plans can be completed within the planned time during
implementation.
ITSTR3. Deviations do not occur in the execution of IT strategy plans.
ITSTR4. Results of IT strategy implementation are of high quality.

IS/IT leadership capability

ITLD1. CIO learns new techniques and new technologies actively.
ITLD2. CIO can adjust ARE objectives to follow business objectives.

Information
system
capability

ITLD3. CIO can find out IT applications to support business operations.

217
IT resource allocation capability
ITLOC1. CIO fully supports the resources needed for implementation of IT strategy.
ITLOC2. CIO can perform training of information personnel effectively.
ITLOC3. CIO can plan information budget allocations effectively.

Collaboration capability
COOP1. Departments are able to avoid repeated spending or purchases of IS.
COOP2. Departments are able to reach unanimous conclusions on the risks of IS
development.
COOP3. Departments are able to coordinate priorities for IS development.

Knowledge sharing capability

KS1. Planning members share business plans, documents, and reports with each other.
KS2. Planning members share business operating standards, operating models, and
methods with each other.
KS3. Planning members share practical skills learned from work experience with each other.
KS4. Planning members share expert knowledge gained from training with each other.

System development capability

SD1. Organization has expert technical capability related to constructing IS.
SD2. Organization is able to define appropriate needs and specifications when developing
IS.
SD3. Organization is able to perform appropriate assessments before constructing IS.

Project management capability

PM1. IS projects utilize formal project management rules to grasp progress.
PM2. IS projects can meet budget needs.
PM3. The final results of IS projects meet project objectives.

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About the authors

Chi-Hung Yeh is a Doctoral Candidate in the Department of Information Management at
National Taiwan University of Science and Technology (NTUST), Taipei, Taiwan. He has
published in Management Decision. His research interests include issues in e-business and
e-commerce, knowledge management, and IS/IT Strategic Planning (ISSP).
Dr Gwo-Guang Lee is a Professor in the Department of Information Management at National
Taiwan University of Science and Technology (NTUST), Taipei, Taiwan. He received his PhD
from the School of Computer Studies at the University of Leeds, UK, in 1993. Currently, he also
works as a consultant for the Center of Electronic Commerce at NTUST. Dr Lee has published in
the Journal of Information Technology, Behaviour and Information Technology, Industrial
Management & Data Systems, Management Decision, and International Journal of Retail
& Distribution Management. His current research interests focus on knowledge management,
IS strategic planning, and e-business.
Dr Jung-Chi Pai is an Associate Professor in the Department of Business Administration at
Takming University of Science and Technology, Taipei, Taiwan. He received the PhD degree
from the Department of Information Management at National Taiwan University of Science and
Technology (NTUST), Taiwan, in 2003. Dr Pai has published in numerous international journals
such as Behaviour and Information Technology, Journal of Information Science, Industrial
Management & Data Systems, Management Decision and Internet Research. His current research
interests focus on knowledge management and e-business.

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