Fon Sundaravej
Shaping Agility through Digital Options: Reconceptualizing the Role of Information Technology in
Contemporary Firms
By V. Sambamurthy, Anandhi Bharadwaj, and Varun Grover
This article examines the influences of IT on firm performance by using a multi-theoretic lens to argue that IT
investments and capabilities influence firm performance through three organizational capabilities (agility,
digital options, and entrepreneurial alertness) and strategic processes (capability-building, entrepreneurial
action, and co-evolutionary adaptation). Firms with agility tend to invest in IT and use it as a competitive
strategy to gain higher financial performance than their competitors. The strategic value of IT includes lower
coordination cost by using telecommunication/ networking, lower marginal or additional costs associated with a
unit cost, and expand numbers of customers. The proposed network of relationships between IT competence
and firm performance composes of the following constructs: IT competence, which composes of the level of IT
investments, quality of IT infrastructure, IT human, and nature of partnerships; agility, which is the ability to
detect and seize market opportunities with speed and surprise and can be differentiated into customer,
partnering, and operational agility; digital options, which is a set of IT-enabled capabilities in the form of
digitized process and knowledge capitals and can be viewed with reach (association across units, regions, or
partners) and richness (quality of information); entrepreneurial alertness, which is the capability of the firm
response to innovative opportunities and can be seen as strategic foresight or insight; capability-building,
which integrates IT and business resources into organizational capabilities; entrepreneurial action, which is
the discovery of market opportunities to create new products; and co-evolutionary adaptation, which refers to
learning of firms over time through experience. These dynamic capabilities and strategic processes impact the
ability of firms to launch various competitive actions and these actions are a significant antecedent of firm
performance. The insights of this study focus on the role of IT as a digital options, organizational capabilities,
strategic processes, competitive actions, firm performance, and integrated perspective of these attributes.
Moreover, according to several propositions in this study, the entrepreneurial alertness is highlighted to be the
key to activate capabilities in launching competitive actions.
In summary, the article “Information Systems Success: The Quest for Dependent Variable” by DeLone and
McLean (1992) lights an interest on the IS success determination. From this article, we learn which factors are
proved to predict a success of IS projects. DeLone and McLean (1992) also encourage more attention on a
measurement of the IS impact on organizational performance from IS researchers. After almost a century,
subsequent researchers response to such attention by attempting to construct organizational strategies, using IT
to obtain better business performance and maintenance of competitiveness from other competitors, based on the
factors they learn in the past. Bharadwaj (2000) in the article “A Resource-Based Perspective on Information
Technology Capability and Firm Performance: An Empirical Investigation” starts paying attention on IT
capabilities that bring a higher business performance based on the IS resource-based theory, which composes of
tangible, human, and intangible capabilities. Such IT capabilities can be applied to subsequent articles
pertaining to the IS success. For instance, Sambamurthy, Bharadwaj, and Grover (2003) in the article “Shaping
Agility through Digital Options: Reconceptualizing the Role of Information Technology in Contemporary
Firms” argue that agility, digital options, entrepreneurial alertness, capability-building, entrepreneurial action,
and co-evolutionary adaptation are significant factors leading to better business performance. Obviously,
Sambamurthy, Bharadwaj, and Grover (2003) put greater concern on human and intangible capabilities than
tangible capability to determine an IS success. Melville, Kraemer, and Gurbaxani (2004) in the article “Review:
Information Technology and Organizational Performance: An Integrative Model of IT Business Value” also
confirm that IS resources, especially tangible and intangible IT capabilities, are valuable and can bring a success
to organizations. Lastly, Piccoli and Ives (2005) in the article “Review: IT-Dependent Strategic Initiatives and
Sustained Competitive Advantage: A Review and Synthesis of the Literature” summarize that the use of IT can
create business competitiveness and recommend four barriers, which comprise of IT resources (all tangible,
human, and intangible aspects), complementary resource, IT project, and preemption (how to sustain
competitiveness) barriers, to sustain the competitive advantage in IS use.
IS 7890: IS Research Seminar
Spring 2006