Dutch horticultural industry
January, 2017
Robin Christiane Gunning (10737545)
Universiteit van AmsterdamFaculty of Economics and Business
Executive Programme Management Studies, MSc. Specialization: strategy and organization
Academic year: 2016-2017
Thesis supervisor: Dr. Sebastian Kortmann Amsterdam, January 31st 2017
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Berenschot, where my colleagues had numerous inspiring missions throughout The Netherlands. Additionally, I discovered several possible links and opportunities for the industry in the classes I attended during my Master. To name a few: strategic organisational design, big data and new business models. This combination made it possible for me to start this project with a lot of energy and enthusiasm.
In preparation of this thesis I interviewed several professionals who helped a lot in carving out the direction of my research. In no particular order: Jaap Stolze from Hillenraad Partners, Geert van Oosterhout from LTO Glaskracht, Pieter van Hout from LTO/Agrifoodtech, Cor Verdouw from Wageningen Universiteit, and Amir Sabirovic from Berenschot Intellerts. These professionals took the time and energy to enlighten me about the characteristics of the industry and showed me many other sources of information. Also, my direct supervisors and much appreciated colleagues at Berenschot, Edwin Lambregts and Paul Pietersma, who helped me through this project by discussing results and theories more in depth. Finally, my thesis supervisor from the Universiteit van Amsterdam, Sebastian Kortmann. He has been very
enthusiastic and showed a lot of confidence in the final product, which made the entire journey both challenging and inspiring.
I am very grateful for these different contributions and I hope you’ll enjoy reading it as much as I enjoyed working on it.
Robin Gunning
January 31st, 2017 Amsterdam
1.1 What makes the Dutch agricultural industry extraordinary? 4 1.2 Explaining the basics of a complex food chain 7 THEORETICAL CONSTRUCT 9 2.1 Dynamic capabilities 9 2.1.1 Competitive advantage 13 2.1.2 Strategic agility 14 2.2 IT capability 19 2.3 IT maturity 24 2.4 Firm performance 32 3. RESEARCH DESIGN 35 3.1 Method 36 3.2 Conceptual model 36 3.3 Hypotheses 37 3.4 Measures, definitions and items 41 3.5 Population and data collection 44 3.6 Survey type 44 3.7 Validity and reliability 44 3.8 Execution 45 4. RESULTS 47 4.1 General statistics 47 4.2 Assumptions 50 4.3 Hypotheses testing 50 4.4 Simple linear regression 51 4.5 Moderation analyses 57
5.2 Suggestions for further research 66 6. CONCLUSION 67 7. LITERATURE 69 7.1 References 69 7.2 Images 76 7.3 Tables 77 8. APPENDIX 78 8.1 Survey in English 78 8.2 Survey in Dutch 79 8.3 Original plots and tables SPSS 81 8.3.1 Tables and plots concerning H1 – ANOVA 81 8.3.2 Tables and plots concerning H1a – ANOVA 82 8.3.3 Tables and plots concerning H2 – moderation 84 8.3.4 Tables and plots concerning H2a – moderation 86 8.3.5 Tables and plots concerning H3 – mediation 87 8.3.6 Tables and plots concerning H3a – mediation 88 8.4 Background information: societal link of this paper 90
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1. Abstract
This thesis investigated the relationships between IT capability and IT maturity and firm performance, and how strategic agility would mediate or moderate these
relationships. This research took place in the Dutch horticulture, since these topics are on top of mind in the industry. Additionally, the literature provided a lacuna that justified this research.
Over 100 farms in horticulture have been contacted to participate in this research. Mixed results were reported. In single models, IT capabilities and IT maturity were indeed of great importance for a firms’ performance. Especially IT maturity proved to be a very determining predictor for a firms’ success. However, both predictors in one model did not show any significance. This was contrary to the expectation. Also, strategic agility did not affect the relationships between IT and firm performance as expected. There was a modest moderation between IT capabilities and firm
performance detected. Reasons for the lack of more interesting results could be that any firm needs to be strategically agile to a certain level, independent on their (financial) performance or IT efforts.
Suggestions for research concern for example the main role of strategic agility to the industry. Even though farmers claim it is important to them to be flexible and
strategically, this sample showed mixed results. Another suggestion for further research concerns the future of IT. It would be interesting to discover possible
relationships between a mature level of IT and data driven innovations. This is already happening in other industries like healthcare and the automotive industry.
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2. Introduction
This thesis is about firms that reap the benefits of technological opportunities and fully grasping its potential. There are firms that are evolving and learning new capabilities, but there are also firms that stay behind. This thesis examines the relationships between IT capabilities, IT maturity, strategic agility and firm performance in the Dutch agricultural industry, more precisely: the horticulture. With increasingly intense competition, shrinking product cycles, accelerated technological breakthroughs, and progressively increasing globalization, business may nowadays be described as being in a chronic state of flux with continual variation in its external environment. (Nadkarni & Herrmann, 2010) Maintaining flexibility in a firm’s strategy seems a solution, however this poses a challenge when firms need to make certain investments in equipment like greenhouses in agriculture. Other
examples are investments in software and hardware that help executing daily business and help in strategic planning. (Bondt, 2016) In addition, there is sufficient empirical evidence that supports the claim that strategic flexibility drives firm performance. (Johnson, Lee, Saini & Grohmann, 2003) These considerations make these topics interesting to both business and theory, which has led to the following research question:
Are IT capabilities and IT maturity predictors for firm performance and does strategic agility influence these relations in the Dutch horticultural industry?
Many businesses and start-ups nowadays embrace the opportunities new information technologies can bring to an organization. Therefore, it would be interesting for the
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management literature to execute a research to discover how and when IT affects adaptiveness and helps firms to become or maintain their competitive advantage. Of course, this research is not exclusively interesting for business, also the literature provides a lacuna, which allows suggestions for research. The article written by Arora and Rahman (2016) shows the theoretical justification concerning this topic.
The fact that IT investments form a substantial part of capital expenditures of firms, is not a reason for them to hold back IT investments. (Parent & Reich, 2009;
Ravichandran & Liu, 2011) Through benefits like improved productivity,
profitability, and market share are organizations hoping to yield on these investments. (O' Brien et al., 2010) Although there is a general consensus among strategy
researchers that IT improves productivity (Brynjolfsson & Hitt, 2000), according to Arora and Rahman (2016) the strategists differ on the question whether IT can provide sustained competitive advantage. (Dewan & Ren, 2011) The main reason for this view is that declining costs of computing, availability of standard software packages (such as ERP systems), and proliferation of the internet has made IT ubiquitous, and, therefore, meaning that theoretically its strategic value has
diminished according to several authors. (Chae, Koh and Prybutok, 2014; Carr, 2003) Some researchers suggest that IT used to provide competitive advantage in earlier days when it was still costly and not available to everyone in the industry. However, proponents of IT as strategic tool are aware of these existing views, but they view it differently. These strategists claim that although IT has become ubiquitous, it is the way in which IT is used together with other firm resources that provide competitive advantage (Raymond & Bergeron, 2008; Santhanam & Hartono, 2003) This stream of researchers claim that there indeed are several ways in which IT can be used together
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with complementary organizational resources to improve market position (Melville et al., 2004). An additional step which makes the lacuna even bigger is the contribution of Arora and Rahman (2016). They claim that besides the contradicting views of researchers on the effects of IT, there is also a scarcity of research papers that assess the use of big data. Even more importantly, how big data in this era can provide competitive advantage, (Arora & Rahman, 2016)
According to this line of reasoning, there is indeed a twofold gap in the scientific theory which makes this research valuable to strategic management. Even though this twofold gap is interesting for research since it suggests how valuable a mature level of IT can be for the future, this research is only limited to the role of IT. In an effort to make matters a bit more interesting, the additional construct maturity has been added, which provides more information on how firms deal with IT in their organization. The following subparagraphs will provide context about the industry and the
importance of the industry to the Dutch economy which clarifies where this research took place.
1.1 What makes the Dutch agricultural industry extraordinary?
The agricultural industry is important to the Dutch economy. The Netherlands is the second largest exporter of agricultural products in the world, with an added value of 80,7 billion euros in 2015. (LEI, 2015) The industry as a whole is accountable for 10% of the Dutch economy and employment rates. Out of the 40 largest food companies in the world, 12 of them have a residency in The Netherlands and are exploiting R&D activities. (PWC, 2016)
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Unfortunately, these impressive numbers are not guaranteeing anything for the future. Even though there are a lot of opportunities concerning innovation and progress in the industry, this also comes with the inevitable challenges as well. The Dutch Minister for Agriculture Sharon Dijksma spoke at the world's largest agricultural trade fair, the International Green Week in Berlin. As Minister Dijksma explained:
"Last year was anything but easy for the Dutch agricultural sector: falling prices, a Russian boycott, and bird flu outbreaks have posed problems for many businesses in the Netherlands. It is impressive to see how Dutch farmers and agricultural
entrepreneurs have managed to hold their own under these conditions. The figures tell the same tale: the Netherlands remains a global leader in agriculture, second only to the U.S. in terms of agricultural exports. Kudos for Dutch agriculture!" (Dijksma, 2015)
The statement of Minister Dijksma shows that the Dutch agricultural industry can be resilient, strong and adaptable, even when circumstances are threatening the status quo. As minister Dijksma pointed out, the farmers have shown that they are able to compete with superpowers like the USA, even though the land used for farming much smaller than in America or any other country that is listed in the top 5 countries exporting agricultural products worldwide (RVO, 2016). This means that the farmers in The Netherlands are doing something extraordinary. There are several possible reasons for the high level of performance of the Dutch agricultural industry. According to ir. L.C. van Staalduinen (WUR, 2016) the position of the industry is partly owed to the current status as transit country. The industry is earning more than last year on improving imported goods. In addition, the Dutch agricultural industry has always invested a lot in innovation centres. There are numerous institutions in
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every country that focus on innovation, but what makes it unique in The Netherlands is that it is called the golden triangle: firms form the value chain, the government makes sure there is access to (international) markets, and knowledge centres are preserving a wide range of information and they execute research which is important for innovation. Several organisations are working together in this golden triangle, which is called The Food Valley. It does not refer to something geographically, it is a network. (Food Valley NL, 2016) Food Valley helps firms to grow internationally and focuses on current trends like sustainability, innovation, technology, healthy and available food for everyone, and avoidance of food waste. According to Food Valley, an explanation for the current Dutch position in the agricultural industry is the
constant focus on innovation and knowledge preservation throughout the years. This focus also extends towards the environmental situation in The Netherlands. Due to the harsh environmental laws, the greenhouses are one of the most efficient and
sustainable of the world. (WUR, 2016) Also the Rabobank, the Dutch bank once exclusively focussing on the agricultural industry, is pointing out the necessity of a sustainable food system. Justin Sherrard, strategist at Rabobank Food & Agribusiness
Research, wrote het paper 'Building a Smarter Food System'. This paper explained
how technology can automate processes, and how big data tells us what the current status is of a crop or other resource. Algorithms can help make decisions based on data to adjust speed and precision on the production, processing and distribution of food. (Rabobank, 2016)
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1.2 Explaining the basics of a complex food chain
Before assessing the possibilities of information technology in the agricultural system, it important to acknowledge how the agricultural industry works. Before the tomato lands on your plate, it has finalised an incredible journey. Below is a simplified picture of the Dutch food chain.
Image 1: Van Driel, J. (2013) Dutch Food Chain Network
Even though this is a simplified version of the Dutch food chain, it shows that there are many actors between the farmer and the supermarket. These links are
interdependent and show the complexity of the chain. In addition, the links all have their own trends, challenges and other issues they need to address. One important topic of 2016 has been the buying power of the supermarkets. The big retail chains like Ahold pressured their suppliers to lower their prices with 1% or 1,5%. This led to an outrage because for many farmers it meant they had to sell their goods below cost price. (Veerman, 2015) Another important trend for the supermarkets is for example the growing online transactions in the retail. New business models like HelloFresh
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force supermarkets to purchase their goods for lower prices to save time and find out what new possible strategies for the future could be. (Duijn, 2016)
Finally, this simplified food chain does not acknowledge the existence of international parties that add additional streams to the chain. It concerns an international market, so also The Netherlands imports a significant number of goods, which also end up in the value chain. (Roetert, 2011)
In the appendix, there is an analysis enclosed for more information on which trends that are related to this topic. This analysis is provided in paragraph 9.3.
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Theoretical construct
In an attempt to answer the research question, several related theoretical constructs need to be examined. In this part of the thesis proposal, the current status of scientific knowledge surrounding the main concepts is described. To form a complete overview of the theories, also a historic perspective is presented. This shows which main authors were responsible for the foundation and its micro-foundations. In addition, it will show how the theory has been developed over the years.
Firstly, the body of literature of dynamic capabilities will be discussed. Strategic
agility is an important related theory inferred from dynamic capabilities, which will
show in the following paragraph. The following theoretical constructs concern IT capabilities and IT maturity within firms. As the paragraph will show, adaptiveness of IT capabilities is an important construct for the research question. Finally, the
outcome variable and fourth theoretical construct firm performance will be discussed. Besides discussing these constructs independently, the existing relationship will be disclosed.
2.1 Dynamic capabilities
This chapter describes the dynamic capabilities theory and its foundations and definitions that have evolved over the years. Every business acquires many
capabilities that enable it to carry out the activities necessary to move its products or services through the value chain. Some capabilities have more impact than others, but a few of them must be superior if the business is to outperform the competition. (Day, 1994) In this thesis, dynamic capabilities will be the starting point of the theory.
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According to one of the first authors that ever wrote about dynamic capabilities, it can be defined as: “the firm’s ability to integrate, build, and reconfigure internal and
external competences to address rapidly changing environments”. (David J. Teece,
Gary Pisano, and Amy Shuen, 1997)
The basic assumption of the dynamic capabilities framework stated by Teece et al (1997) is that core competences should be used to modify short-term competitive positions that can be used to build longer-term competitive advantage.
Other authors with a different but complementary view on dynamic capabilities are Eisenhard and Martin. Eisenhard & Martin (2000) define dynamic capabilities as:
“The firms’ different processes that use resources – specifically the processes to integrate, reconfigure, gain and release resources – to match and even create market change. Dynamic capabilities thus are the organisational and strategic routines by which firms achieve new resource configurations as markets emerge, collide, split, evolve, and die.”
This definition is emphasizing the importance of resources and the occurring reconfigurations, which Teece et al (1997) also discusses. Both definitions are of equal importance for this thesis since they are complementary and they are both responsible for the foundation of this view in strategic management.
Other authors who made more recently an attempt to define dynamic capabilities are Helfat et al (2007). According to these authors, dynamic capabilities refer to “the
capacity of an organization to purposefully create, extend, or modify its resource base”. To name another respected researcher in the scientific field: Porter (1990)
recognizes dynamic capabilities as an important factor for organization’s
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the local environment of the firm combined with the firms’ dynamic capabilities as a predictor for sustainable competitive advantage. The 5 forces-model of Porter
emphasizes his thoughts on dynamic capabilities and sustainable competitive advantage.
These definitions on dynamic capabilities show that there is a general consensus that dynamic capabilities lead to a better sustainable competitive advantage. However, a more recent article from Giniuniene and Jurksiene (2015) states that the role of dynamic capabilities in increasing firm performance is still questionable.
Contradictory, Eisenhard & Martin (2000) claim for dynamic capabilities to lead to competitive advantage immediately. The work of Eisenhardt &Martin (2000) attempts to contribute by reasoning to the resource-based view by explaining the nature of the dynamic capability view. The authors state that the existence of dynamic capabilities in a firm, will not lead to long-term competitive advantage. The value of dynamic capabilities to an organisation lays in the capacity the reconfigure the existing resources and capabilities when dealing with change. Dynamic capabilities are necessary but not sufficient conditions for sustainable competitive advantage. In addition, while the resource based view states that resources need to be ‘VRIN’ (valuable, rare, inimitable and non-substitutable) (Barney, 1991) in order to achieve sustainable competitive advantage, these assumptions by themselves will not hold in the dynamic capabilities view according to Eisenhardt and Martin (2000).
These different questionable views on dynamic capabilities and competitive
advantage raise the question on why all the attention concerning dynamic capabilities emerged in the first place.
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According to Mintzberg et al. (2003) the dynamic capabilities view primarily emerged as a reaction to the deficiency of the resource-based view and the action based view in the new conditions of the economy of knowledge and innovation. This statement additionally suggests why researchers have different lenses when researching
dynamic capabilities. While some are researching the nature of dynamic capabilities, others are focussing on the antecedents or outcomes. For this thesis, it is useful to acknowledge different ways the theory can be structured. According to Güttel and Konlechner (2009), the general dynamic capabilities can be structured in strategic and operational processes. Strategic processes mostly relate to sensing and seizing new opportunities in the dynamic environment. (Teece, 2007) Operational processes are needed mostly to reconfiguring internal or external competencies and shaping operational routines in the company. (Güttel and Konlechner, 2009; Ridder, 2012) Other authors who discuss the function of routines and dynamic capabilities are Zollo and Winter (2002). According to these authors, dynamic capabilities consist of routines. (Zollo & Winter, 2002) The concept of dynamic capabilities as a set of routines implies that in order for the performance of an activity to constitute a capability, it must have reached some threshold level of practiced or routine activity. Before something can be qualified as a capability, it should be at a certain level. Taking a first shot at something does not mean it is a capability already. (Helfat & Peteraf, 2003)
The existence of dynamic capabilities in an organisation shows that it is assumed that multiple capabilities are combined in order to reach sustainable competitive
advantage, which in addition explains the relationship between the resource-based view and dynamic capabilities. Dynamic capabilities can be used to enhance the
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existing resource configurations in the pursuit of long-term competitive advantage, which is RBV’s logic of leverage. Dynamic capabilities are also often used to build new resource configurations in the pursuit of temporary. (Eisenhard & Martin, 2000) As stated earlier, the dynamic capability view states that resources are needed but that the resources themselves will not lead to sustainable competitive advantage.
2.1.1 Competitive advantage
As discussed, there are different views on whether dynamic capabilities lead to sustainable competitive advantage. According to Teece (1997), dynamic capabilities is a prerequisite for sustainable competitive advantage, which means that without these capabilities, sustainable competitive advantage would be hard to reach and maintain. Closely related is Barney’s view (1991), which, descends from the resource-based view. Barney’s view suggests that every organisation has resources, but only the resources that hold the ‘VRIN’ features will lead to competitive advantage. These features are: valuable, rare, inimitable and non-substitutable. An additional
perspective on the resource-based view and capabilities has been introduced by Helfat and Peteraf (2003), that is called the capability lifecycle, and it explains the
fundamental sources of firm heterogeneity. According to the authors, this lifecycle provides a way of thinking about the evolution of capabilities, as well as a more fully dynamic approach to the resource-based theory. The lifecycle consists of several stages, respectively: the founding stage; the development stage; and the maturity stage. The authors discuss the requirements for each phase and the six possible additional stages of the capability lifecycle (retirement, retrenchment, renewal, replication, redeployment, and recombination – which are called the six R’s of
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capability transformation). Every subsequent stage depends partly on historical events, which also shows the unique (heterogeneous) characteristics of a firm. Helfat & Peteraf (2003) propose that it is one of the most important factors to truly
understand the evolution of a firm’s resources and capabilities, otherwise the dynamic resource-based view cannot go on to effectively answer questions about competitive advantage and disadvantage over time based on capabilities and resources.
Since the capability lifecycles emphasize the development of capabilities and the decisions that need to be made, this approach can be useful for the capabilities needed for the research topic as discussed in the introduction.
2.1.2 Strategic agility
This thesis will explore the role of strategic agility. Several definitions of strategic agility have been assessed among numerous authors, and this paragraph will shed a light on how strategic agility is defined and its presumed role in business.
Strategic agility means that an organisation can take quick, decisive, and effective actions and that it can trigger, anticipate, and take advantage of change (Doz & Kosonen, 2007). Strategic agility is a related construct of dynamic capabilities, and therefore, both theories in this paper closely examined. Strategic agility has been defined as “the ability to quickly recognize and seize opportunities, change directions
and avoid collisions.” (McCann, 2004) Strategic agility captures an organisations
ability to manage and adjust to continuous change and prepares organisations to embrace relentless change by generating a range of resource and capability
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and realigning and mobilizing resources. (Brown & Eisenhardt, 1997) Firms demonstrating strong agility are able to maintain their strategic supremacy despite market fluctuations. (D’Aveni, 1999) Many notable authors have assessed strategic agility as a theory. Prahalad and Hamel (1993) add to this theory that a high level of strategic agility means that a firm is able to demonstrate a consistent capacity for concentrating resources on key strategic issues, accumulating new resources
efficiently and effectively, complementing and combining resources in new ways, and redeploying resources for new uses. This definition of strategic agility seems ideal for firms to put the resource-based view to use, which is also the reason for mentioning the resource-based view briefly as well in the previous paragraph.
According to Lengnick-Hall and Beck (2009), strategic agility can be achieved through different components of routines, resources and competencies depending on the conditions and outcomes that a firm is striving to achieve. How strategic agility is applied in a firm can vary due to the long- or short-term strategy that management has in mind. Ultimately, the effectiveness of agility depends on the main goal of the strategy of the firm: is it trying to survive through discontinuous and radical
innovation or is it seeking a more stable but flexible strategy that leads to competitive advantage?
The authers Doz and Kosonen (2010) have identified three types of strategic agility that might occur at times that changing business models demand a new business strategy. Doz and Kosonen have operationalized strategic agility in three categories and every category has its own purpose in the strategic renewal process.
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Firstly: strategic sensitivity, which accounts for the sharpness of perception of, and the intensity of awareness and attention to strategic developments. The second aspect refers to the top management team: leadership unity: the ability of the top
management team to make bold, fast decisions, without being bogged down in top level ‘win-lose’ politics. Finally, the authors refer to the internal resources: resource
fluidity, which concerns the internal capability to reconfigure capabilities and
redeploy resources rapidly. (2010) These types of strategic agility are relevant since it shows how managers could have different views towards strategic agility as a theory, which might affect the implementation.
Another author with a distinctive view on the agile enterprise is Dove (1999). Dove assesses agility in firms not merely as a goal or a strategy that can be chosen or not. According to Dove, agility should be considered as a condition of survival, the bare necessity of existence. Without agility, firms would not be able to respond to changing environments, and firms would cease to exist. (Dove, 1999) According to Dove, there is an obvious reason for the increase of attention that the concept of strategic agility has received in both academia and business. The environment is changing faster than it is used to, and faster than most organizations are capable of matching. This new situation forms a threat to organizational viability. Dove draws a parallel with the use and application of knowledge in organizations by stating that knowledge management and change proficiency are co-dependent relationships and that it should be seen as enabling competencies for an agile organization. In the agile organization knowledge management is responsible for having the right knowledge in the right place at the right time. This means that if certain knowledge is not in the right place on the right time, opportunities concerning changing environments might
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be missed. According to Dove (1999) both knowledge and agility are fluid concepts, and organization need to give meaning to these concepts to understand and learn how to deal with change.
Agility for a firm is to be capable of operating profitably in a competitive environment of continually and unpredictably changing customer opportunities. (Goldman, Nagel and Preiss 1995) According to the authors (who focused their research on the manufacturing agility) it is impossible to manage a business that handles good and bad times, at all times – at all sorts of operations. The use of financial metrics for the analysis of results will not improve a firm’s strategic agility. According to Goldman et al (1995), core competences must be able to create customer opportunities and to react to opportunities that present themselves from the market. An agile organization can offer skills and expertise through long time periods. Core competences most importantly come from workforce and technical forms. An organization should be organized around the core competencies in a way that
rapidness and cost effectiveness are maximized in customer contacts. (Goldman et al. 1995) It seems like the authors try to explain that only in that case, strategic agility adds to the organizational competitiveness, since agility – which has a similar perspective to the view of Dove (1999) – is not a goal in itself, it is a condition to survival, a means for the goal to be competitive.
Goldman et al. (1995) shows four strategic dimensions that need to be considered for agile competition. The first on is enrich the customer. This should be done by creating customer relationships; in a way that they last changes and are long term. The second dimension suggests to work cooperatively to increase competitiveness. Setting up
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organization to handle changes and unpredictability is the third dimension, and the
fourth is utilizing the effects of people and inflowing information. These dimensions show that culture plays a role in an organization since it also describes how people should be working together. Additionally, it can be stated that these four dimensions are not organized in one day. These dimensions can easily be part of the internal culture in how employees share information and deal with customers, co-workers and other stakeholders. The employees should be made part of the success of the firm and that is only possible if they feel responsible and have the right information. This is a continuous process of flexing existing structures and managing relationships to publish customer opportunities. (Goldman et al, 1995)
Another additional view that shows the potential of strategic agility comes from Vokurka and Fliedner (1998) who claim that agility is a capability of responding to change in a dimension beyond flexibility. The authors suggest that flexibility refers to the capability of an organization to move from one task to another quickly and as a routine procedure, with each situation defined ahead of time so that the procedures needed to manage it are in place. According to the authors, traditional dimensions of flexibility include for example: product or service related (volume), or process related (machine changeover). Agility on the other hand takes it a step further. Vokurka and Fliedner (1998) claim that agility entails a continual readiness to change, sometimes radically and there is no such thing as the completion of being agile. Agile firms embrace change as they understand not only current markets, product lines,
competencies and customers, but also understand the potential for future customers and markets and the necessity of changing to meet those opportunities.
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Therefore, the authors define agility as “the ability to market successfully low-cost,
high quality products with short lead times and in varying volumes that provide enhanced value to customers through customization”. (Vokurka & Fliedner, 1998) It
must be added, that in this line of reasoning, the Dutch horticultural already is, or definitely should be, an agile industry.
2.2 IT capability
As discussed, it is accepted that firms compete on the basis of resources that are heterogeneously distributed among firms and that this resource heterogeneity is responsible for the observed variability in financial performance across firms (Barney, 1991). Capabilities refer to an organizations ability to assemble, integrate, and deploy valued resources, usually, in combination or co-presence (Russo et al, 1997).
A firm’s IT capability is defined by Bharadwaj (2000) as “its ability to mobilize and
deploy IT-based resources in combination or co-present with other resources and capabilities.” In short, the IT capability is embedded within the fabric of the firms.
Bharadwaj argued that IT capability is as an organizational capability created by the interaction of IT infrastructure, human IT resources, and IT-enabled intangible resources (Bharadwaj, 2000). Another more recent view on IT capabilities is from Kohli and Grover (2008), who suggest that IT capabilities are often created by combining specific physical IT artefacts, human and technological resources. IT infrastructure comprises the computer and communication technologies and the shareable technical platform and databases. The critical dimensions of human IT resources include technical IT skills and the managerial IT skills. The enabling role of
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IT is illustrated by utilizing the three key organizational intangibles: customer
orientation, knowledge assets and synergy. And Tippins and Sohi (2003) provided the component of IT capability: IT knowledge, IT operations and IT objects. Because of imitation and acquisition, there is now a perpetual requirement to innovation with Information Systems/Information Technology to affect change and to adapt business processes and practices to respond to change created by competitors, often referred to as agility. Subsequently, the IT capability was portrayed by Peppard and Ward (2004) as having three attributes: a fusion of business knowledge with IT knowledge, a flexible and reusable IT infrastructure, and an effective use process. These attributes are interrelated according to the authors, since they are co-dependent.
The point of the previous paragraph, was to show how many functions and
approaches IT can have in an organisation. IT capabilities can vary a lot in business. Since the resource-based view has established that there is a clear link between resources and competitive advantage, IT capabilities and the resources needed for these capabilities prove to be an interesting subject for research (Benitez-Amado & Walczuch, 2012). Every domain, level and industry has big differences in how IT in organised internally and how it adds value (Gaitho, 2015). Therefore, this thesis will be focused on one industry and one specific part of the value chain. The expectation is that this decision of delineation will make this thesis more relevant for management and literature. In the methodology, this decision will be further elaborated upon.
Many authors have shared their views and beliefs on information technology and its strategic value for business. Porter acknowledged already in 1985 the impact that information technology was making and its role in a competitive environment. Porter
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(1985) announced its role in future economy, and predicted how the information revolution would affect competition in three vital ways. Firstly, it changes the
industry structure and, in so doing, alters the rules of competition. Secondly, it creates competitive advantage by giving companies new ways to outperform their rivals. Finally, it spawns whole new businesses, often from within a company’s existing operations.
The special role Porter referred to, concerns the fact that information technology and information systems is not anymore the exclusive territory of IS departments. Every part of a firm’s value chain or department deals with information and could improve the firm’s competitive advantage with new ideas and additional business models. An additional clarification of the importance of contemporary information technology Porter (1985) suggests in the same article that every value activity has both a physical component (the task itself) and an information-processing component. Whereas for most of the industrial history, technological progress principally affected the physical component of what businesses do. During the Industrial Revolution, companies achieved competitive advantage by substituting human labour for machines.
Information processing was mostly the result of human effort. Like Porter, there are several authors that predict the importance of information technology, especially in more recent literature where the competitive advantage of information technology has proven itself. However, there are also authors who claim information technology is overrated, and that investments only lead to destruction of capital. Responsible for this statement is Carr (2003). He claims that it is only possible for resources to be truly strategic and what makes a capacity a basis for a sustained competitive
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by having or doing something that they cannot have or cannot do. Carr (2003) states that the core functions of IT (data storage, data processing, and data transport) have become an available and affordable commodity to any firm. (Carr, 2003)
Another author who would agree with Carr is Clemons et al. (1991). He has made his point through the resource-based view (RBV). According to the RBV, information technology (IT) per se may not generate a sustainable advantage, because it can be commoditized through competitive imitation and acquisition (Clemons et al, 1991). These views triggered Scott (2007) to contribute to the discussion by researching the effectiveness and role of IT in organisations. Scott (2007) cited Carr (2003), and gave more in depth arguments on why Carr might have a point. According to Scott (2007) there have been indeed several threats that have slowed down the investment in IT. Scott (2007) mentions the opinion that IT should be treated merely as a commodity which does not add any strategic value, which in turn has pushed the information system in an organization into a defensive position with a role as a cost centre instead of a strategic partner with the business. (Carr, 2003; Hirschheim, Schwarz & Todd, 2006). According to Vincent et al. (2005), the current environment is affecting organizations in a way that they are not prone to upgrade their traditional enterprise systems due to the cost, the complexity, the disruption to the business and the
perception that the functionality available is good enough. Another threat Scott (2007) discusses, is the growing national shortage in IT skill. Zwieg et al. (2006) describes how fewer employee opportunities in IT has led to a decline in enrolment’s in U.S. university IT programs. This resulted in information system organizations with a scarcity of graduates with IT skills and conceptual understanding of IT issues.
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CIOs (Luftman, Kempaiah, & Nash, 2006). These trends that Scott (2007) discusses are relevant to the discussion, but they do not account for the fact that business worldwide spend over $2 trillion a year on IT, and that this accounts for almost 50% of capital expenditures in U.S. firms. (Carr, 2003) Researchers, as well as Scott (2007), propose that CIOs are increasing their strategic influence, but that they need to overcome several challenges. These challenges are subsequently:
a. The need to support the increasingly mobile workforce with mobile devices and collaboration tools;
b. To support business process management through collaboration through collaboration with business process owners;
c. To support managerial decision-making on what to outsource, when to use OSS and when to use on-demand enterprise software; and,
d. To manage the increased security issues due to mobility, outsourcing, and on-demand software.
Scott (2007) stated that if these challenges would be overcome, “IT would matter” by delivering cost-effective analytical solutions to support decision making and by demonstrating clear business value from IT.
A more recent but complementary view on the business value of IT from the resource based view derives from Arora & Rahman (2016). Competitive organisations cannot survive without information systems, while there are at the same time big differences in adoption of data-driven innovations inferred from innovation in IT that may or may not add value or help in sustaining a firm’s competitive advantage (Arora & Rahman, 2016). According to Raghupathi & Raghupathi (2014), big data analytics is
increasingly defended as one of the most important IT innovations in healthcare. This thesis researches the same possibilities but for horticulture. Therefore, is an additional
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theoretical construct added to this thesis that will be discussed in the following paragraph. The purpose of this thesis is to examine the effects of IT, how this relates to strategic agility, and to explore its opportunities for contemporary firms. From a managerial perspective, it is important to stress that IT encompasses more than numbers and systems. It provides the potential for managers to have access to explicit information and decision making capabilities that have not been available previously (Sonka, 2014). Data-driven innovation entails exploitation of any kind of data in the innovation process to create value (Stone and Wang, 2014). Big Data is perceived to be as relevant for agriculture as it is for the rest of the economy (Sonka, 2014).
2.3 IT maturity
The previous paragraph has indicated the advantage and importance of developed IT capabilities in an organization. In the introduction, also been established that IT capabilities have become a ubiquitous capability since no organization can function without it. To understand the effectiveness of IT and to emphasize differences in acknowledging the role of IT in any organization, the additional construct IT maturity will be assessed.
Before discussing different attempts from authors on maturity in IT, it is worthwhile to mention that there have been proposed over 100 maturity models in the scientific field. (De Bruin et al, 2005) This constant stream of new publications shows the general interest. However, it is important to stress that the approaches appear to be similar. Additionally, authors only rarely reveal their motivations, the development process, the procedural method, results, or evaluation of the model. (Becker et al, 2009) Therefore, it is worthwhile to investigate why maturity in IT is even
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investigated. One of the first authors who acknowledged the existence of different maturity levels in information systems was Churchill et al (1969). Churchill examined the state of the art in computer-based information systems for management to
determine how managers used them. (Benbasat et al, 1984) The authors suggested that the development of computer applications in business could be divided into four stages. These stages were not categorized chronologically, but mere related to sophistication. These stages, who the authors refer to as ‘Types’, do not require a strict ordering in time. (Benbasat et al., 1984) Type 1 and 2 refer to the more operational side of business applications. The difference between these two types is that Type 1 applications were faster and cheaper version than existing systems, and Type 2 is described as extending or improving the efficiency of Type 1, providing more comprehensive reports of a management control nature. Type 3 and 4 relate to the automation of managerial tasks, where Type 3 applications extend to the
managerial domain by integrating previously separate systems or by incorporating decision processing programs. Type 4 applications refer to the strategic decision making of senior managers and utilize models allowing for ad hoc queries. (Benbasat et al., 1984) The representation of the described types in development of information system business applications has led to the following concept of maturity: “The
growth in understanding and experience on both sides (systems analysts and programmers, and managers) constituted a managerial base that built upon successful applications and matured only over a period of time.” (Churchil et al.,
1969) This definition shows that ‘time’ is indeed an element that for the maturing of information systems.
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More authors have elaborated on the definition of maturity in IT. One of the earliest of them is Richard Nolan (1975), who has made a subsequent analysis of the maturing of information systems and technologies. He also took ‘time’ and ‘the application’ into consideration. The following paragraph will discuss his research process over the years.
Richard Nolan's stage model is the best known and most widely cited model of
computing evolution in organizations. (King & Kraemer, 1984) Richard Nolan (1975) developed the maturity construct through the Stage Hypothesis Model. Nolan
identified a certain path in a graph in an “S” form, which shows each stage that organizations go through when implementing organizational information systems. The four stages comprise of initiation, contagion, control and integration. In 1984 Nolan expanded the model by adding two more stages: data administration and
maturity which is the reason that this model does not appear in literature as one
model, but rather as a number of versions developed between 1969 and 1979. Below is a depiction of all six phases of evolution.
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The Nolan model has had a powerful influence on the information systems field, probably due to its bold approach to dealing with a phenomenon of great complexity in a straightforward and simplistic manner. (King & Kraemer, 1984) Even though the model is failing due to its simplicity, it does explain two significant theoretical contributions. First, it makes the notion explicit that the growth of computing gained traction by forces both inside and outside the organization. Secondly, it introduces an intellectually powerful construct of dialectical interplay between freedom and
constraint in the control of computing that yields periodic states of equilibrium. (King & Kraemer, 1984)
An important critique on Nolans’s maturity model comes from Benbasat et al. (1984). These authors stated that problems arise in measuring maturity, and that more work needs to be done in order to “overcome these obvious measurement problems”. Their observations were congruent with other documented measurement issues associated with single-item factors and factors with a small number of items. (Etezadi-Amoli & Farhoomand, 1991; McDonald, 2014). Even though the authors found inadequate support for Nolan’s stage hypothesis model, they did found support for certain progression in formalizing management concerning the information systems function for organizations. (Karimi et al., 1996; p.484) The model presented by McFarlan (1984) and Raho & Belolahv (1987), describes the overall IT diffusion process, and how the IT management strategies evolve as firms move toward IT maturity.
According to this model, the IT diffusion process can be segmented into four phases. The first phase is the technology identification and investment phase; the second phase concerns learning and adaptation; the third phase is about rationalization and management control; finally, the last phase concerns maturity and widespread
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technology transfer. This model suggests that the challenge of assimilating technology changes in four phases. The authors also stress that different management approaches are required when the technology is in the adoption phase, and that growth processes like learning evolve as responsibilities among specialists, users and management change. Finally, there are several examples that are typically attributed to the maturity phase. First of all, the benefits and experience of the new technology are dispersed throughout the organization. Subsequently, learning is relatively complete which means that all members should be more or less sufficiently involved to understand the technology enough to use it to their advantage. Then, long-term analysis and planning are emphasized, and finally, the technology base is installed and integrated.
(McFarlan, 1984; Raho & Belolahv, 1987) This is not where a firm is done evolving. According to the authors Cash et al., (1992) and Earl (1989), new technologies continue to emerge that may offer a firm a new opportunity. The decision will be to either move into new application areas or to restructure the existing ones. In the maturity phase, a firm is faced increasingly with challenges to adapt and to adopt new technologies. (Cash et al., 1992; Earl, 1989)
Firms vary substantially in the extent to which IT has been integrated into their business strategies. (Karimi et al., 1996) The integrated firms show a more proactive orientation towards IT, and tight integration between business strategy and IT is cited as key to firms’ success. (Johnston & Carrico, 1988) The study that Karimi et al. (1996) executed was taken to a next level with the research of Benbasat et al. (1984) as a starting point. To Karimi et al. (1996) it was clear that the factors influencing IT maturity by Benbasat et al. (1984) was not elaborate enough. Therefore, Karimi et al. (1996) based their research on both the existing input as on the feedback they received
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from information systems managers from the field. After pretesting, the researchers ended up with 20 items that could be grouped into four criteria: IT planning mode, IT control mode, IT organization, and IT integration. In the following paragraph, these criteria will be shortly summarized and explained.
The first item is the IT planning mode. The primary objective of this criterion in the maturity stage is to align IT plans with a firm’s business plans. (Zviran, 1990) Also it is important to extend the infusion and diffusion of IT within a firm. (Sullivan, 1985) Questions that need to be asked are for example: how should IT priorities be set? Or: what strategic opportunities are presented by IT? (Karimi et al., 1996) The second item is the IT control mode. According to Cash and Konsynski (1985) control of IT activities in a firm has drastically changed during the past two decades from a loose/informal and technical orientation to a tighter, more refined and managerial orientation. This item emphasizes how IT managers are trying to find the balance between short-term delivery and making the right investments for the future. (Earl, 1989) The third item of IT maturity is IT organization. This refers to the transition IT activities in an organization. The first IT activities could work autonomously since early applications were limited to transaction-oriented functions requiring only limited user awareness and involvement. (Karimi et al., 1996) This has changed, and end-users’ input need to be given attention when developing and the implementing applications. (Amoroso and Cheney, 1991; Cheney et al., 1986) Concerns in a new IT era would be: How will IT affect an organizational structure? What are the roles and responsibilities of the IT director in case we need one? (Karimi et al., 1996)
The final item is IT integration. Traditional management strategy for automation used to have a bottom-up approach, where different functional areas were automated on an
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application-by-application basis, without consideration for integration and
optimization on a firm level. This resulted in firms finding these application systems incompatible, redundant, and in many cases, incomprehensible. (Inmon, 1984) The effects of integrated firms created long-lasting advantages. For example, integrated firms use IT to create new products and services. Also, it made it possible to create linkages with both suppliers and customers, and finally, integrated firms make it possible to establish new performance standards in their industries. (Johnston & Carrico, 1988)
More recent authors on IT maturity are Ragowsky, Licker and Gefen. According to Ragowsky et al. (2012) IT maturity is a well-known management definition which refers to generally to the characteristics of the technical infrastructure and its internal management, such as the activities the IT department has to perform well, in order to be successful at meeting the organizational information needs. Ragowsky et al. claimed that even though there have been established numerous IT maturity models, (examples: Reinartz, Krafft, & Hoyer, 2004; Luftman, 2000, 2003; Luftman &
Kempaiah, 2007), none of them is truly explaining the activities of an IT unit within a firm. Instead, the model developed by Ragowsky et al. (2012) focuses on creating a maturity model of the common ground where both the IT department and its internal users understand each other, which results in mutual trust. A reason for this shared goal may be provided by Becker et al (2009). These authors state that maturity models, or different levels of maturity, serve to solve the problems of determining a company’s status quo of its capabilities and deriving measures for improvement therefrom. The acronym “OITM” (organizational IT maturity) emphasizes the ability of non-IT people (i.e., clients) to understand IT (its capabilities and constraints),
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communicate with the IT people, specify, ask for, deploy, and use information technology productively and responsibly within a business context. (Ragowsky et al, 2012) They claim that enterprises often assign little strategic value to IT and resist additional investment. Chief Information Officers find often that profitable IT deployment is blocked. The misalignment between business and IT may stem from the lack of IT use within the enterprise. In other words, the enterprise does make use of IT but at an immature level which prevents the firm from growing. Below you find an overview of the different maturity levels according to the authors, where level 0 is characterized by ignorance and lack of interest in what IT can do for an organization. For every increasing level, firms become more informed, willingness to invest increases, trust in IT partners increases as well, accepting of IT practices, and finally being responsible for for their own use of information systems in pursuit of the organizational goals. (Ragowsky et al., 2012)
Image 3: Organizational IT maturity model (Ragowsky et al., 2012)
When comparing the different approaches of the discussed authors on IT maturity there are two overall similarities. The first similarity is that the highest level of maturity is often also the most integrated way of having IT within the firm, and that therefore, it has (or should have) a positive effect on firm performance. Additionally,
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most authors treat IT maturity as a capability that could be learned or developed within the firm.
2.4 Firm performance
This final part of the literature review will assess what firm performance means to firms, and why it is relevant for this research.
An often-cited article on firm performance is from Venkatraman and Ramanujam (1987). These authors stated that even though there has been executed a lot of research on firm performance, there is no consensus on what that actually means. Authors tend to use different methods and numbers which makes different papers hard to compare. Additionally, more than any other field of research, is strategic
management focused on organizational performance and all adjacent topics (Schendel & Hofer, 1979), which makes it even more important to find a certain agreement about it. Besides the lack of consensus, there are more reasons that have led to absent of consensus. The selection of indicators is often based on convenience, and there is little consideration for its dimensionality even when authors state themselves that there is dimensionality indeed. (Combs, Crook and Shook, 2005; Glick, Washburn and Miller, 2005)
Santos and Brito (2012) contribute to his discussion by finding fitting concepts of performance and related measurements. This paper makes two major contributions. The first is instrumental, which relates to the scale itself, which in turn can be used in other empirical studies. The other is conceptual, which relates to the discussion of performance dimensionality. The model identifies at least five dimensions: financial performance, customer satisfaction, employee satisfaction, social performance and
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environmental performance. The study adds that multidimensionality automatically implies that the indicators cannot be used interchangeably because they represent different factors that determine firm performance. (Santos & Britos, 2012) The definition of performance can differentiate from one’s standpoint which acknowledges the issue of dimensionalities in the previous paragraph. This is an explanation for the stakeholder theory from Freeman (1984). Stakeholders can be for example stockholders, who would primarily like to see financial performance, whereas other stakeholders, like clients, would consider a high level of service as an organizational performance. (Zablah et al, 2012)
A final factor that ought to be considered when defining performance is the time frame in when it is measured. (Carneiro, 2005) Good performance on a particular dimension is neither guaranteeing anything for the future, nor for another dimension. Since investors are the primary owners of the firm (Chakravarty, 1986), and their main goal is superior performance, is this from their (stakeholder) perspective the main definition of firm performance.
Financial performance can be represented by profitability, growth and market value. (Cho & Pucik, 2005) According to Brito and Santos (2012), are these three factors complementing each other. Whetten (1987) explains that growth shows that a firm is able to increase its size, which leads to an increase of its absolute profit and cash generation. The advantage of growth for a firm, is that economy of scale applies which makes is possible to an increase of future profitability, which means it is easier for a firm to generate returns. (Glick et al., 2005)
Since this research is assessing firm performance as a basic outcome variable, and financial metrics are more neutral than the more subjective metrics of firm
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performance like customer satisfaction, employee satisfaction or environmental satisfaction, there has been chosen for basic financial information. (Santos & Brito, 2012)
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3. Research design
The core of this thesis will assess the relationship between strategic agility, IT capabilities, IT maturity and firm performance in the agricultural industry. Since the industry is characterized by the high level of diversity in commodities combined with the complexity of the food chain, this research will be restricted to a certain part of the food chain and a sub-agricultural industry; the horticulture. The horticultural industry is interesting for research because the production and export is very important to the Dutch economy, and fruit, vegetables and flowers are one of the most popular
commodities to export (RVO, 2016). Below is shown a simplified image of the chain explained by the department of entrepreneurship: Rijksdienst voor Ondernemend Nederland (RVO).
Image 4: RVO, Routekaart groente- en fruitverwerkende industrie, (2015)
According to the analysis of the ABN Amro, “AGF Industrie” (potatoes, vegetables and the fruit industry) will be stimulated this year, due to the growth of the Dutch economy in general. Consumers will consume less than 2015, but due to several stimulating programmes, the industry will show better numbers than last year. (ABN Amro, 2016) ABN Amro also explains several trends that the farmers are currently dealing with which are related to the entire agricultural industry.
This research will be focussed on the firms that operate first part of the chain, respectively, the farms that are producing flowers, fruits and/or vegetables. These
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firms are especially dealing with innovations concerning IT and automation as acknowledged by ABN Amro. This means that these firms find themselves forced to make decisions on these topics (RVO, 2015). Finally, it is also important to restrict this research to an achievable scale.
3.1 Method
A quantitative approach will in this proposal lead to the most insights while
researching the dependencies and causalities between the theoretical constructs. This research aims to show the relationship between the level of maturity and capabilities of information technology and firm performance where strategic agility will be tested as either a mediating or moderating effect.
3.2 Conceptual model
The conceptual model depicted in this paragraph shows the connections between the variables that will be statistically tested. To clarify the individual tests, there will be additional depictions of the conceptual model for the hypotheses concerning
moderation and mediation. It is important to stress that X1= IT Capability and X2= IT Maturity will be tested in one model, but these variables will additionally be handled as unique predictor variables. This conceptual model is only meant to show the expected connections, which are considered relevant in this thesis.
37 H1 H2 H1 a 3.3 Hypotheses
As announced in the introduction, this thesis investigates the relationships between the stated variables. Therefore, there has been chosen to execute several regression analyses, that will show the results of possibly existing causal relationships.
As shown in the theoretical construct, several authors seem to have contradicting views on the importance of IT capabilities for a firm. In addition, there has been established that IT can have different roles in a firm and that every domain, level and industry has big differences in how IT in organised internally and how it adds value (Gaitho, 2015). Even though there are authors who claim that IT capabilities do not add any strategic value, and even suggest that IT has the role of a cost centre instead of a strategic partner for the business (Carr, 2003; Hirschheim, Schwarz & Todd,
H3 M= Strategic Agility Y= Firm Performance X1= IT Capability X2 = IT Maturity H3 a H2a
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2006), there is enough evidence in different literature from different years and authors who do claim the importance of IT capabilities for a firm. The authors
Benitez-Amado and Walczuch (2012) reason through the resource-based view that IT
capabilities should be treated as resources that lead to competitive advantage. Another statement that shows the importance of IT for firms comes from Arora and Rahman (2016). These authors state that competitive organisations cannot survive without information systems, while there are at the same time big differences in the adoption of data-driven innovations that may or may not add value or help in sustaining a firm’s competitive advantage. Since the authors have different views, and this research is focused on one particular industry, it is important to discover the relationship between IT capabilities and firm performance. Besides, competitive advantage does not automatically lead to firm performance. This line of reasoning has led to the following hypothesis.
H1: There is a positive relationship between IT capabilities and firm performance.
More specifically, we expect IT capabilities to demonstrate a strong positive effect on firm performance.
The literature concerning IT maturity in the literature review has shown that there are different models that show different levels of maturity in firms. Also, as already has been established, firms vary in the extent to which IT has been integrated in the business strategy. (Karimi et al, 1996) According to Karimi et al (1996), IT maturity in a firm reflects a firm’s evolution in planning, organization, control and integration aspects of their information system’s function. A higher level of IT maturity would
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imply a significant formalization of IT activities. (Karimi et al, 1996) In turn, this would suggest that the information systems function in a firm with a higher level of IT maturity would have evolved from the data-processing orientation into the strategic orientation. (McFarlan, 1984; Sabherwal & King, 1992; Ward et al., 1990)
Subsequently, integrated firms display a more proactive orientation towards IT, and tight integration between business strategy and IT is cited as an important factor to firms’ success. (Johnston and Carrico, 1988) This is also the expected result, and has led to the following hypothesis
H1a: There is a positive relationship between IT Maturity and firm performance.
More specifically, we expect IT maturity to demonstrate a strong positive effect on firm performance.
The previous hypotheses concerned the direct effect between IT capabilities and IT maturity. In the following hypotheses, the third variable strategic agility will be added to the model. Since this will be the most experimental part of the study, several multiple analyses will take place. Through multiple regressions there will be tested how strategic agility either moderates or mediates the effect between IT capability and firm performance, and subsequently, how strategic agility either moderates or
mediates the effect between IT maturity and firm performance. The reason for both types of analyses is that a moderating effect would imply that strategic agility would influence the effect between IT capability and firm performance – and in the second analyses IT maturity and firm performance. A mediating effect of strategic agility
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would explain the effect between respectively IT capability and firm performance – and IT maturity and firm performance.
Strategic agility is a capability of responding to change in a dimension beyond
flexibility. (Vukorka & Fliedner, 1998) As defined in the theoretical construct, is to be capable of operating profitably in a competitive environment of continually, and unpredictably, changing customer opportunities. (Goldman et al., 1995) These explanations of strategic agility show a lot of similarities on how working in the Dutch agricultural industry looks like. Since according to Porter (1985) IT capability leads to a better firm performance, it is interesting to discover how strategic agility might affect this assumption, because strategic agility is also important for firms in a competitive environment (Goldman et al., 2015)
Arora and Rahman (2016) view IT as the starting point for innovative IT applications which creates opportunities as discussed in the theory. According to the authors, contemporary firms simply cannot survive without information systems, where according to Vokurka and Fliedner (1998) claim that firms cannot survive without being agile (without loss of quality). These assumptions have led to the following four hypotheses that are equally important for this thesis, since the underlying
dependability’s are of great importance for answering the research question.
H2: Strategic agility positively moderates the relationship between IT capabilities and firm performance within the organization.
More specifically, we expect IT capabilities to demonstrate stronger positive effect on firm performance in the organization with a high level of strategic agility.
