Information & Management 52 (2015) 643657

Contents lists available at ScienceDirect

Information & Management

journal homepage: www.elsevier.com/locate/im

IT capabilities and product innovation performance: The roles

of corporate entrepreneurship and competitive intensity
Yang Chen a,1, Yi Wang b,*, Saggi Nevo c, Jose Benitez-Amado d, Gang Kou a
a

School of Business Administration, Southwestern University of Finance and Economics, Chengdu, Sichuan Province, PR China
Business School, Shantou University, 243 Daxue Road, Shantou 515063, Guangdong Province, PR China
c
Information Technology Management, School of Business, University at Albany, 1400 Washington Avenue, Albany, NY 12222, USA
d
Department of Management, School of Human Resources and Labor Relations, School of Business and Economics, University of Granada, Granada, Spain
b

A R T I C L E I N F O

A B S T R A C T

Article history:
Received 6 April 2014
Received in revised form 11 May 2015
Accepted 15 May 2015
Available online 12 June 2015

Despite a plethora of studies that demonstrate the positive impacts of information technology (IT)
capabilities on innovation performance, our knowledge of the processes through which such gains are
achieved and their susceptibility to environmental factors remains limited. This paper lls these gaps by
examining the roles of corporate entrepreneurship (CE) and competitive intensity at the rm level,
thereby contributing to research on IT business value. Using data from manufacturing rms in China, we
nd that CE fully mediates the effect of IT capabilities on product innovation performance and that
competitive intensity moderates the proposed relationships.
2015 Elsevier B.V. All rights reserved.

Keywords:
IT capabilities
Corporate entrepreneurship
IT business value
Competitive intensity
Product innovation performance
Matched survey sample

1. Introduction
Product innovation, dened as new products and/or services that
are introduced to meet the needs of external users or market needs
[16], is key to a rms competitiveness, especially in a dynamic
business environment that is characterized by rapid technological
change, shortened product life cycles, and globalization [16]. It is
apparent that to survive, compete, and grow, rms that operate in
such competitively intense environments need to be more
innovative in their product introduction. As an example, Procter
& Gamble considers serving the needs of a very diverse consumer
population both quickly and cost effectively to be one of its most
critical challenges. The company regards its ability to deliver a
higher frequency of new products across multiple markets as key
to its competitiveness in the industry [19,63]. Given its importance
for rms competitive success, product innovation is often viewed
as a critical performance factor that can provide avenues for
expansion into new markets and opportunities to earn greater

* Corresponding author. Tel.: +86 186 8802 0045; fax: +86 754 8290 3443.
E-mail addresses: chenyang@swufe.edu.cn, francisnju@gmail.com (Y. Chen),
ywang63@stu.edu.cn (Y. Wang), snevo@uamail.albany.edu (S. Nevo),
joseba@ugr.es (J. Benitez-Amado), kougang@yahoo.com (G. Kou).
1
Tel.: +86 188 2804 1300; fax: +86 028 8709 2768.
http://dx.doi.org/10.1016/j.im.2015.05.003
0378-7206/ 2015 Elsevier B.V. All rights reserved.

prots. Product innovation performance, which is the extent to

which the rm has achieved its protability, sales volume and revenue
objectives for newly introduced products and/or services [2], is thus
an important indicator of the return on product innovation.
The existing literature provides evidence that IT capabilities can
have a signicant impact on product innovation performance (e.g.,
[7]). The construct of IT capabilities is a rm-level construct that
sums the abilities of a rm to mobilize and deploy IT-based
resources and to leverage the value of other resources to improve
various rm performance indicators [7,52]. Despite the breadth of
research on IT capabilities and product innovation, the mechanisms through which IT capabilities inuence product innovation
performance are not well understood. The extant research suggests
that our knowledge of those mechanisms will likely be enhanced if
we examine the processes by which rms apply IT capabilities to
improve their product innovation performance in dynamic
business environments (e.g., [48]).
Recent studies posit that the impact of IT capabilities on rmlevel outcomes should be examined by taking into account other
organizational resources as intermediaries and the business
environments as moderators (e.g., [48,51]). Accordingly, we draw
on the corporate entrepreneurship (CE) literature to examine the
mechanism that links IT capabilities and product innovation
performance. Related to but distinct from the notion of entrepreneurship, which focuses on individuals behaviors, CE reects a

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Y. Chen et al. / Information & Management 52 (2015) 643657

rms overall efforts toward venturing, innovation, and renewal

directed at advancing new opportunities to use or expand its
resources [67]. CE activities are conceptualized to be directly
related to important organizational outcomes such as growth and
protability [68]. In addition, a rms CE activities are susceptible
to the inuence of external factors such as environmental
dynamism [68].
The CE framework is appropriate for this study because it
enables the integration of various aspects that are related to
information and processes that are critical for a richer understanding of IT-enabled innovation. IT-enabled innovation is
attributed to both a rms internal activities and processes and
external environment inuences. We examine the role of CE in ITenabled innovation to gain a better understanding of the IT
innovation relationship by considering the inuencing role of
competitive intensity, which is a critical indicator of the external
business environment. Furthermore, anecdotal evidence suggests
that effective CE depends on the availability of relevant and timely
information and of reliable communication channels, which are
the hallmark of IT (e.g., [7]). Indeed, it was recently argued that IT
is the magic ingredient that inspires and most often enables
contemporary entrepreneurial endeavors [20, p. iii]. Thus, the CE
framework appears to be capable of offering a conceptual bridge
between IT capabilities and a rms product innovation performance while also taking the rms external business environment
into account.
This paper offers the following three contributions to research
and practice. First, it contributes to the business value of the IT
literature by developing a theoretically grounded model that traces
the path from IT capabilities to a rms product innovation
performance through the mediating role of CE. Second, it
contributes to the foundational literature of CE by (a) extending
our understanding of how IT enables CE activities and (b) shedding
light on the moderating role of the external business environment
(i.e., competitive intensity). Finally, the paper contributes to
practice by helping managers better identify the business
environment where their investments in IT capabilities are most
likely to be observable, thereby informing their decisions regarding
IT implementation and use.
The remainder of this paper is organized as follows. In the
following section, we briey discuss the CE literature to provide a
conceptual framework and clear theoretical boundaries at the rm
level. We then discuss the anticipated relationship between IT
capabilities and CE and follow up with a discussion on the expected
impact of the environments competitive intensity. Next, we
describe the methodology of the study and present the empirical
results. We conclude the paper with a discussion of our ndings
and their limitations and offer several avenues for future research.
2. Corporate entrepreneurship (CE)
Entrepreneurship is the process by which individuals either
on their own or inside organizations pursue opportunities
without regard to resources they currently control [59, pp.
23]. Focusing on organizational behaviors, CE is dened as a
vision-directed, organization-wide reliance on entrepreneurial
behavior that purposefully and continuously rejuvenates the
organization and shapes the scope of its operations through the
recognition and exploitation of entrepreneurial opportunity [31,
pp. 21]. Given its clear importance to a rms growth, performance
and survival, CE has attracted much attention from strategy
scholars (e.g., [58]). CE is a process through which a rm seeks to
innovate, creates new businesses and transforms itself by changing
the business domain or key strategic processes to inuence the
rms various performance outcomes [58]. Although CE encompasses a variety of activities, there is a common core that is

comprised of three fundamental activities: business venturing,

new product development and self-renewal [58]. Business
venturing reects an emphasis on the creation of a new business
unit or acquisition of a new business; new product development
involves the transformation of new ideas to value-added
products, services or organizational changes; and self-renewal
reects domain redenition and business model reconstruction
[28].
CE offers a promising lens for examining the path from IT
capabilities to rm-level outcomes. Specically, rms with high
levels of CE activities tend to invest more in product development
and improvement, new business domain exploration, and process
redenition, all of which can enhance rms product innovation
performance. Such high levels of CE activities may be achieved
when rms successfully leverage their information technologies
[20], suggesting that the impact of a rms IT capabilities on
product innovation performance may be inuenced by the
intermediary role of CE activities. CE is a useful theoretical
framework for this study because it explicitly takes the rms
external business environment into account [68], thereby permitting us to examine the path from IT capabilities to product
innovation performance under varying environmental conditions.
Specically, the framework conceptualizes the moderating effect
of competitive intensity on the relationship between IT capabilities, CE and product innovation performance, whereby more
dynamic environments are viewed not only as uncertain and harsh
but also as representing the opening and closing of a myriad of
windows of opportunities for entrepreneurial activities.
Firms that are involved in entrepreneurial activities must have
relevant and timely information. For example, referring to the
famous aphorism of performance measurementwhat gets
measured, gets done [5], Stopford and Baden-Fuller [61] reported
that in the organizations that they studied, existing IT focused on
the old strategy and excluded new information. Thus, what was
known was measured and used to inform future decisions, and
what was unknown, and could have potentially informed new
strategies, was ignored. According to Stopford and Baden-Fuller
[61], organizations that sought to engage in and leverage
entrepreneurial activities discontinued IT that provided ambiguous and misleading information and obtained new IT that provided
means for testing initial hunches. They also noted that the rms
that they studied made substantial investments to enhance their
learning by obtaining data that would help them to receive and
evaluate feedback on new initiatives.
Effective CE activities also require those who are involved to
have access to reliable means of communication and an integrated
view of the organization. These requirements stem from the notion
that CE is a rm-level activity, and successful CE initiatives are
often the outcome of coordinated interactions among individuals
and groups that occupy different hierarchical positions within the
rm and are located at various geographical locations. Without
appropriate communication channels and an integrated perspective that includes collaborating, sharing information and incorporating related activities, it would be difcult to conceive of and
execute entrepreneurial plans [68].
In sum, the above requirements for effective CE namely, the
need for (1) relevant and timely information, (2) an integrated
view of the organization, and (3) effective communication appear
to be closely aligned with the main attributes of ITi.e., enabling
the efcient collection and dissemination of information across the
organization, helping to electronically integrate disparate business
activities and providing access to multiple communication media.
This apparent alignment suggests that IT capabilities can play an
important enabling role for CE activities within rms and help
rms achieve sustained competitive advantage and superior
performance.

Y. Chen et al. / Information & Management 52 (2015) 643657

In the next section, we elaborate on the nature of the IT

capabilities construct and then put forward hypotheses regarding
the relationships between IT capabilities and CE.
3. Hypothesis development
In this section, we derive ve hypotheses and develop a
theoretical model that builds on the foundations of the CE
framework and extends it to the context of IT. The main constructs
and the hypothesized relationships among them are depicted in
Fig. 1.
3.1. IT capabilities
IT capabilities refer to a rms abilities to mobilize and deploy
IT-based resources in combination or co-presence with other
resources and capabilities [7, pp. 171]. They have the potential to
help rms outperform their rivals in terms of cost reduction, prot
increasing and other performance measures [32]. Because the
construct of IT capabilities refers to a broad range of common
information and communication tools and related services, past
publications argued that it is more accurate and useful to view the
construct of IT capabilities broadly and conceptualize it as a
formative second-order construct (e.g., [6,7]). In this study, we
adopt this view and treat IT capabilities as a second-order
construct that consists of four dimensions: IT infrastructure
exibility, IT integration, IT business alignment, and IT management [73]. IT infrastructure exibility refers to the extent to which
a rms IT infrastructure is scalable, modular, compatible with
legacy systems and able to address multiple business applications
[10]. IT integration refers to the extent to which a rm links its IT to
those of business partners, helping the partners to exchange
information, communicate, and establish collaborative relationships [54]. IT management refers to the rms ability to effectively
implement IT-related activities such as IT project management,
system development and IT evaluation and control [71]. IT
business alignment refers to the extent to which IT and business
operations share congruent goals and maintain a harmonious
relationship [46]. Although other conceptualizations and measurements of IT capabilities exist in the literature (e.g., [7]), we expect
that those that are used in this study are more likely to covary with
CE and innovation-related activities and thus better explain
variability in key outcome variables. Specically, a exible IT
infrastructure can provide rms with the ability to innovate by

645

facilitating information sharing across different functions and

implementing extensive changes in business processes [10]. IT
integration can improve a rms ability to sense and respond to
opportunities in the market and to integrate business processes
[54]. IT management is considered central to the success of product
development efforts [71]. IT business alignment focuses on
maintaining an IT strategy that is consistent with a rms business
strategy to support the formulation and realization of the rms
innovation goals [46].
Conceptualizing the construct of IT capabilities as a secondorder construct is further important for the present study because
CE activities often span many business units and different
organizational functions, suggesting that a perspective that
focuses on a single component of IT capabilities can be construed
too narrowly to provide a comprehensive understanding of the
relationship between IT capabilities and CE activities. The
relationship between IT and rm innovation has drawn much
attention from academics and practitioners. The extant research
often examines the various innovation-enabling effects of specic
IT capabilities in isolatione.g., IT infrastructure and IT-leveraging
capabilities [52]. Yet, product innovation is a cumulative, rmwide process that involves various functional units and activities
[53], and a systemic approach is required to examine IT-enabled
innovation at the rm level. Therefore, in this study, we examine
the impacts of overall IT capabilities on product innovation by
applying a comprehensive conceptualization of IT capabilities.
Referring to the abovementioned apparent link between the
requirements for effective CE and the main attributes of IT, we
propose IT capabilities as an important antecedent of CE activities.
To substantiate this proposition, we discuss how IT capabilities can
inuence CE in three main ways, i.e., helping to create and share
relevant information, facilitating communication, and enabling the
renement and reconstruction of business systems and their
integration into a cohesive whole. These IT capabilities correspond
to three activities that are viewed as integral to successful CE. To
reiterate, for CE to be effective, rms should collect, analyze and
interpret data about the rms competitors, industry changes and
trends; these data can help to launch new ventures [68]. In
addition, the initiation and implementation of CE depends on the
quality and amount of communication among the employees and
business units that are involved in CE activities across the rm
[68]. Furthermore, CE appears to be most effective when different
business units can be adapted and integrated to support new
initiatives. Table 1 provides a summary of the attributes of IT

Control variables
Firm size
Firm age
Ownership structure
Industry type
Past performance

IT infrastructure
flexibility

IT integration
IT capabilities
IT business
alignment

IT management

H1, H3

Corporate
entrepreneurship

H2, H3

H4

H5

Competitive
intensity

Fig. 1. Research model.

Product innovation
performance

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Y. Chen et al. / Information & Management 52 (2015) 643657

Table 1
Summary of IT attributes and their impacts on CE.
Main attributes of IT capabilities

IT support for effective CE

Information creation and sharing

IT capabilities provide entrepreneurially relevant information and build a supporting technological

environment within a rm
IT capabilities facilitate communication and interactions within and across a rms boundary to improve
innovation more effectively
IT capabilities increase both the speed and effectiveness of internal changes and transformation within rms

Communication facilitation
Business system renement
and reconstruction

capabilities and their impacts on CE. Below, we provide a detailed

explanation of how IT capabilities can help to support the
effectiveness of CE.
First, IT capabilities can enable CE by offering information that
is required for relevant CE activities and building a supporting
technological environment within a rm. For example, strategic
utilization of IT can promote a rms entrepreneurial alertness, i.e.,
proactive attentiveness to information that is relevant to
entrepreneurial activities [58]. The ability to quickly scan data
and sense information about market trends is critical to a rms
willingness and capacity to engage in CE activities. Firms use IT to
collect data from multiple channels and elicit information about
customers demands and preferences to increase the success of
new product development. For example, GM uses a Web-enabled
tool to collect data on customer preferences to better design new
products [56]. Data regarding external entities, including competitors, partners, and other stakeholders, can be collected and
processed using IT-based tools to identify market opportunities.
Quick access to real-time environmental data is critical for a rms
ability to proactively identify and respond to opportunities and
make decisions about entrepreneurial initiatives. A exible IT
infrastructure enables a rm to collect and analyze data about
products and customer demands and preferences and then
distribute the data among various business processes, including
R&D, manufacturing and procurement; therefore, it can promote
efciency and effectiveness in new product development. For
example, as a collection of decision support technologies for rms,
business intelligence software could effectively shorten the time
lag between data acquisition and decision making, thus converting
customers demands into new products [12]. A rm with strong IT
management capability and sophistication is characterized by the
ability to manage IT resources to address key aspects of business
strategy. With the support of a high level of IT management
capability, a rm can better leverage data collection and processing
capacity to address business purposes. For example, IT management is important for identifying, collecting and interpreting
relevant data and information to support business processes [7]. In
sum, with the help of strong IT capabilities, data and information
can be collected, processed, used and shared among various
functional departments to identify business opportunities and
make decisions in response to market changes.
Second, IT capabilities can support CE by facilitating communication and interactions within and across a rms boundary and,
thus, bringing together different groups of relevant stakeholders. A
rms entrepreneurial activities often require contributions from
many participants and sponsors in different business units,
suggesting that a large number of available communication
channels is critical for the success of entrepreneurial endeavors.
The presence of strong IT capabilities in a rm can promote and
support communication and information sharing among individual
employees, functional departments and units as well as between
the rm and its business partners. IT-enabled communication
capability helps to support collaboration efforts among various
functional units that are targeted at addressing customer demands,
new product design and engineering [52]. Interorganizational

communication and collaboration enabled by IT plays a signicant

role in accelerating product development and delivery to the market.
For example, Oracle leverages the Oracle PartnerNetwork (OPN) to
manage partners of varying sizes and business models to support its
new market expansion strategies [14]. Accordingly, a rm with
strong IT infrastructure and IT business alignment could benet
from better communication and collaboration among its various
functional departments and with its partners, thereby helping R&D,
manufacturing, and other functional departments to innovate more
effectivelyi.e., design, build and develop new products and services
that customers want.
Third, IT capabilities play an important role in supporting CE
activities by enabling the rening and reconstructing of foundational business systems and their integration. The success of CE
activities depends on whether a rm can rapidly and efciently
rene and adapt its business activities, processes and structures. IT
capabilities can contribute to a rms CE by increasing both the
speed and effectiveness of these internal changes and transformations. Specically, modularization of a exible IT infrastructure
enables rms to integrate disparate systems and thus efciently
adopt, implement, and upgrade new systems in response to
evolving business needs [8]. A rm with a exible IT infrastructure
can reduce the time to market for new products due to its readiness
to implement new applications, easy access to the relevant data,
and networking abilities. For example, several US airlines have
developed airline reservation systems that offer new services, such
as frequent yer programs, and have created joint incentive
programs with hotels and car rental agencies, which largely rely on
the airlines IT-enabled exibility and integration [37]. In addition,
by making it easier to identify available resources and providing
the visibility of processes and activities across the organization, IT
capabilities can enhance a rms ability to quickly and accurately
allocate resources to new initiatives and tasks, such as cycle time
improvement, cross-functional processes, and collaborative product development.
To summarize, IT capabilities are expected to form a rm-wide
technological foundation that can facilitate exible processes and
operations and are necessary for launching and implementing new
ventures, developing new products, and renewing business
processes and business models. Consequently, we anticipate that
IT capabilities enable and enhance CE. Hence,
H1. IT capabilities are positively related to CE.
3.2. Product innovation performance
Innovation is the successful implementation of creative ideas
within a rm [26]. It is generated from raw ideas that are created
within the rm or derived from the adaptation of new knowledge
that is found outside of the rm. Innovation is generally regarded
as a key ingredient in a rms competitiveness and its ability to
survive in a dynamic business environment [26]. Prior studies have
argued that innovation can be the most important determinant of a
rms performance, and evidence has been found that new
products account for up to one-third of rms nancial growth

Y. Chen et al. / Information & Management 52 (2015) 643657

(e.g., [49]). As a key aspect of overall innovation, product

innovation plays a critical role by enabling rms to earn abnormal
prots and providing a channel for the rms to enter new markets
and industries [50]. Given the interdisciplinary nature of product
innovation, studies have examined the antecedents of product
innovation and its performance from different perspectives (e.g.,
[50]). For instance, from a marketing perspective, Luca and
Atuahene-Gima [45] argued that market knowledge serves as a
mediator between cross-functional collaboration and product
innovation performance. Tang et al. [62] focused on the role of a
rms strategic human resource management in the relationship
between entrepreneurial orientation and product innovation.
Prior research argued that the observed variation of rm
performance could be explained by various levels of CE (e.g., [69]).
For instance, established rms with strong CE could effectively
leverage nancial resources and managerial expertise to successfully introduce new products or services [69]. Because CE is
conceptualized as being comprised of three dimensions i.e.,
business venturing, new product development and self-renewal
the present study aims to elaborate on the impact of CE on product
innovation performance in terms of these dimensions. First, rms
with high levels of entrepreneurial ventures tend to assume a
proactive stance in monitoring the environment and actively
leverage the insights about the market and competition to help
make better decisions about new product development [21]. Second, by focusing their efforts and resources on activities that are
related to new product development, rms that have a high level of
CE more effectively search for new ideas, engage in innovative
thinking, and rene operational processes that can lead to the
generation of new insights and technologies [42], which are
fundamental for eliciting high returns from product innovation
efforts. Third, rms with high self-renewal abilities often embrace
and try new resource combinations, which can improve product
innovation processes and enhance product innovation outcomes.
It is important to note that CE and product innovation
performance are conceptually and empirically different concepts
despite their apparent similarity in terms of the dimension of new
product development [15,49]. New product development is a
process by which attempts are made to transform inventions into
marketable and value-adding products, processes, services, or
organizational changes [28]. It encompasses the R&D activities that
a rm undertakes for the purpose of improving innovation
performance. By contrast, product innovation performance assesses
the contribution of product innovation to rm performance [15].
Based on the preceding discussion, we expect a positive link
between a rms CE activities and its performance in terms of
product innovation. Therefore, we propose the following hypothesis:
H2. CE is positively related to product innovation performance.
Combining H1 and H2, it can be inferred that CE operates as an
intermediary in the relationship between IT capabilities and
product innovation performance. High levels of CE, as a capability,
may be achieved when rms successfully leverage their information technologies. The combination of these arguments suggests
that CE mediates the relationship between a rms IT capabilities
and product innovation performance. Firms with high levels of IT
capabilities could engage in CE in a manner that develops new
products, ventures in new business, and renews the existing
operation with efciency and effectiveness. High levels of CE
provide opportunities for rms to achieve high product innovation
performance.
We conceptualize CE as a full mediator of the path from IT
capabilities to product innovation performance. In other words, we
hypothesize that IT capabilities inuence product innovation
performance only through CE. This conceptualization is motivated

647

by the lack of an observable direct impact of IT capabilities on rmlevel outcomes and by the expected direct link between CE and
such outcomes. It is further motivated by the hypothesized link
between IT capabilities and CE activities.
H3. CE fully mediates the relationship between IT capabilities and
product innovation performance.
3.3. Competitive intensity
The CE literature conceptualizes a rms external business
environment as important. Some scholars argue that in contrast to
certain aspects of an organizations life (e.g., hiring, turnover
intentions), CE seems to ourish under conditions of greater
environmental dynamism and is often viewed as a useful
mechanism for responding to new competitive forces [68]. Specically, rms that operate in dynamic environments are likely to be
more innovative, less risk-averse, and more proactive than those
facing less uncertainty and fewer external pressures [67]. Environmental dynamism captures the perceived instability of the rms
market due to ongoing changes, and for some rms, such
dynamism brings new business opportunities [68]. Specically,
changes in the business environment can open many windows of
opportunity, thereby prompting a spur of entrepreneurial activity
that aims to capitalize on such opportunities [68]. For instance,
rms that face dynamic external business and market conditions
may consider novel business ideas to supplant or supplement their
core business activities via internal development or diversifying
into new markets [68].
As an important indicator of environmental dynamism,
competitive intensity reects the degree to which rms face
competition within their industries [25]. Intense competition is
often associated with erce price wars, heavy advertising and
many competing product offerings. For example, rms in more
technology-intensive industries, such as the electronic product
industry, experience more rapid changes in technology development and face more uncertainty and more intense competition
[66]. A rms external business environment can inuence internal
processes by creating or obstructing strategic matches, which
could interfere with internal processes that are designed to help
the rm attain better performance. Aragon-Correa and Sharmas
[1] work suggested that environmental factors can moderate the
relationship between the deployment of various organizational
capabilities and environmental strategy. Although the strategy
literature foresees both positive and negative outcomes of
operating within an intensely competitive business environment,
the CE literature mainly expects a spur of entrepreneurial activity.
Specically, when competition is intensive, rms need to
engage in risk-taking and entrepreneurial activities that require
both learning and exploration to break out of price wars [70]. Such
activities include innovating new products, exploring new
markets, seeking novel ways to compete, and examining how to
achieve differentiation [70]. In conditions of highly intensive
competition, rms tend to pay more attention to their competitors.
To differentiate themselves from their competitors, rms like to
use their resources to invest in R&D and product innovation. In this
situation, rms increasingly depend on CE activities to achieve
higher product innovation performance. Accordingly, we propose
the following hypothesis:
H4. Competitive intensity positively moderates the relationship
between CE and product innovation performance.
Extending the CE framework to the context of IT, we foresee
another role of competitive intensity. Various scholars argue that
the role of IT in rm-level outcomes can depend on differences in
exogenous variables (e.g., [60]). Some have argued that a proper t

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Y. Chen et al. / Information & Management 52 (2015) 643657

between internal organizational mechanisms and exogenous variables is necessary for achieving superior rm performance (e.g., [9]).
Recent studies note that the effects of IT capabilities on rm
performance may be contingent on external business environmental
factors, such as environmental dynamism (e.g., [18]). For example,
Nevo and Wade [51] proposed that certain IT-enabled resources may
become less or more strategic in the presence of greater uncertainty
in a rms business environment. Furthermore, Stoel and Muhanna
[60] found that the returns on IT capabilities vary according to
different levels of environmental factors. Consistent with the
theoretical framework guiding this study and with the abovementioned literature, we examine how competitive intensity
moderates the relationship between IT capabilities and CE.
Organizational capabilities and resources can play different
roles in highly competitive environments and in less intensely
competitive environments. In an environment that is characterized
by intense competition, top managers often face the imperative to
differentiate their products or services and have a greater need for
information and information processing capacity [17]. In such
environments, rms that face changing external conditions are
often required to quickly and effectively address environmental
pressures. Thus IT capabilities, which enable rms to effectively
mobilize various IT assets and resources, are expected to become
more valuable. In support of this argument, Dong et al. [22]
reported that a digitally enabled capability of efcient coordination becomes more valuable as competition intensies. Similarly,
Nevo and Wade [51] found that IT capabilities (such as IT
integration effort and compatibility) become more strategic in the
face of heightened environmental turbulence.
In a competitive environment, it can be particularly difcult to
sustain the competitive edge that may have been created because
the rapidly changing environment can neutralize previously
generated benets or render them obsolete. Such an environment
raises the need for rms to engage in CE activities, constantly
search for new opportunities as they unfold, or renew themselves
to improve operational efciency and effectiveness. These activities can include continuously scanning and sensing the market and
seeking relevant information and then communicating it to
relevant organizational members. Such conditions imply an even
greater importance of the availability of a exible IT infrastructure;
the collection and analysis of information about customers,
suppliers and competitors; relevant technical and managerial IT
skills; and the rapid communication of real-time information with
internal departments and business partners. Thus, business
environments with intensive competition are expected to make
CE activities even more dependent on relevant and timely
information, reliable real-time communication channels, and
effective organization-wide integration of business units compared with less competitive business environments. In other
words, greater competitive intensity is likely to amplify the
enabling role of IT capabilities in supporting CE activities and the
efcient implementation of a rms entrepreneurial strategy.
In light of this anticipated heightened importance of IT
capabilities for enabling CE under conditions of greater competitive intensity in a rms business environment, we put forward the
following hypothesis:
H5. Competitive intensity positively moderates the relationship
between IT capabilities and CE.
4. Research methodology and analysis
4.1. Data collection
We collected data from manufacturing rms in one province in
Northern China for two reasons. First, this region has the largest

concentration of manufacturing rms worldwide [43]. Due in part

to ongoing economic and political reforms that produce different
ownership structures, such as state-owned and the emerging
private and foreign-owned companies, at least some of the rms
experience heightened competitive intensity, thereby helping us to
test H4 and H5. Second, although IT deployment has increased
greatly in China, the leveraging of IT to create business value
remains a new discipline, and empirical studies on IT issues in
China are sparse [13]. We gathered data through a eld study that
obtained responses from (1) senior IS leaders, such as Chief
Information Ofcers (CIOs), IT directors, and IT managers and (2)
business leaders, i.e., CEOs. Separate questionnaires were developed for an IS leader and a CEO in each rm. Because they are well
versed in the organizational capabilities pertaining to IT and the
innovative management of their organizations, IS leaders and CEOs
were considered appropriate participants for our study. Such a
multiple-source design could also reduce systematic measurement
errors, such as the common method variance.
Direct data collection from rms is difcult to execute in China
due to a weak cooperation culture between academia and industry
[17]. Following Davies and Walterss advice, we sought assistance
from local government agencies that were in a position to request
data from rms in their authority area. This approach was expected
to facilitate data collection and high-quality responses because
Chinese rms often depend on those government agencies for
support and are thus more likely to acquiesce to the agencies
requests. Using the list of manufacturing rms under the
jurisdiction of those agencies, we adopted a probability sampling
approach to obtain a sample that is representative of local
conditions [17]. The target population is manufacturing rms that
are localized in this region, which are predominantly small to
medium-sized and state-owned rms. Additionally, most of these
rms produce products such as energy, machinery, and pharmacy.
With the help of local government agencies, we identied 212 rms
that seemed to be representative of the target population based on
their age, size, ownership structure and industry afliation. All
212 rms agreed to participate in our study.
To minimize the potential for common methods bias and to
better infer the causal relationships in our model, we collected data
in two waves, with the second wave taking place one and a half
years after the rst wave. In the survey of the rst wave (T1), the
CEOs provided information on CE, competitive intensity, past
performance, and rms demographic information (size, age,
ownership structure, industry type); the IS leaders provided
information on IT capabilities. During the second wave (T2), we
asked CEOs to provide information on product innovation
performance. To gather valid information in the Chinese context,
we recruited trained assistants to conduct onsite data collection on
respondents companies. We informed participants of the goal of
the survey, assured them of the condentiality of their answers,
and offered a cash remuneration that is equivalent to an average
employees half-day salary. We employed these efforts to improve
response rates without degrading the accuracy of the information.
Participants completed the questionnaires during their work hours
and returned the completed surveys to the research assistants,
who then combined the questionnaires that were answered by
respondents from the same rm, thus creating a matched survey
sample [64].
During the rst wave (T1), we received responses from 198 CEOs
and 212 IS leaders. After removing unmatched and/or missing
cases, the sample in the rst wave consisted of 151 matched
questionnaires with complete information. In the second wave
(T2), we received 138 completed questionnaires from CEOs, which
all had complete information on product innovation performance.
Therefore, the nal matched survey sample consisted of 138 rms,
resulting in a nal response rate of 65.1% (=138/212). Table 2

Y. Chen et al. / Information & Management 52 (2015) 643657

Table 2
Sample characteristics (N = 138).
Frequency
Firm size (no. of employees)
Less than 100
1001000
More than 1000
Ownership structure
State owned
Non-state owned
Industry type
Basic metal
Non-metallic mineral
Fabricated metal
Machinery equipment
Thermal power
Chemicals
Energy
Mining
Building materials
Firm age (in years)
Less than or equal to 5
610
More than 10
Respondents (matched surveys)
IS leader survey
IT director
Chief information ofcer
IT manager
Other IT leaders
Business leader survey
CEO

Percent. (%)

58
61
19

42.0
44.2
13.8

92
46

66.7
33.3

35
32
7
16
14
6
14
8
6

25.4
23.2
5.1
11.6
10.1
4.3
10.1
5.8
4.3

54
52
32

39.1
37.7
23.2

51
46
37
4

37.0
33.3
26.8
2.9

138

100

presents a summary of our sample. We assessed the possibility of

non-response bias by following De Luca and Atuahene-Gima
[45]. Specically, we compared a sample of 50 matched rms with
a sample of unmatched rms for which we had data on rm age
and number of employees. Analyses of variance indicated no
signicant differences between the two groups in terms of rm age
(F = .50) and the number of employees (F = .42).
4.2. Measurement items
We adopted measures from prior studies and modied them to
t the context of our study (see Appendix A). All multi-item
measures were based on ve-point Likert scales. While the
questionnaires were originally developed in English, they were
subsequently translated into Chinese to facilitate respondents
understanding. The back-translation technique was used to ensure
the linguistic equivalence of the two versions. A bilingual
researcher translated the questions back into the original
language. The back-translation was then compared with the
original questionnaire to examine any discrepancies between the
two questionnaires. Two faculty members and two doctoral
students reviewed the initial version of the questionnaires and
provided their feedback on the content validity and the clarity of
the instructions. Their feedback led to minor changes in the
wording of the items, resulting in the nal version.
4.2.1. IT capabilities
Past studies posited that IT capabilities could not be directly
measured because of their complex facets (e.g., [6]). Therefore, in
the current study, we conceptualized the construct of IT
capabilities as a formative second-order construct that is
composed of IT infrastructure exibility, IT integration, IT business
alignment, and IT management. Specically, measurements of IT
infrastructure exibility are from Bhatt et al. [8]; measurements of
IT integration are from Rai and Tang [55]; measurements of IT
business alignment are from Kearns and Lederer [38]; and

649

measurements of IT management are from Bharadwaj et al.

[6]. A ve-point Likert-type scale, ranging from 1 (strongly
disagree) to 5 (strongly agree), was used.
4.2.2. Competitive intensity
Because it is undergoing reform and marketization, China has
been facing a series of institutional changes in aspects such as
political, economic, and enterprise ownership structures, which
are attracting an increasing number of rms to this emerging
economy [43]. Thus, market competition has intensied as private
enterprises proliferate and the number of enterprises drastically
increases. For the reective construct of competitive intensity, we
adopted measurements from Jaworski and Kohli [33]. We asked
the CEOs to evaluate the extent to which they agreed or disagreed
that their rms faced a business environment with intense
competition. A ve-point Likert-type scale, ranging from 1
(strongly disagree) to 5 (strongly agree), was used.
4.2.3. Corporate entrepreneurship (CE)
We followed Heavey et al. [29] by treating CE as a latent secondorder construct with three rst-order dimensions: business
venturing, new product development and self-renewal. This
specication helps to capture the common variances or covariances shared by the rst-order factors [44]. The reective secondorder factor of CE represents a covariation model and captures the
commonality shared across these three dimensions [44]. CEOs
responded using a ve-point Likert-type scale that ranged from 1
(strongly disagree) to 5 (strongly agree).
4.2.4. Product innovation performance
Prior research found that subjective measures of product
innovation performance are highly correlated with objective
measures or information on product innovation released by rms
or governments (e.g., [65]). Prior research conducted in China
suggests that subjective measures of product innovation performance should be adopted due to the lack of systematic and reliable
objective data on innovation performance (e.g., [47]). It is worth
mentioning that a large number of our respondents were from
small-to-medium-sized rms that were not listed on public
exchanges (see Table 2), thus objective data (e.g., nancial reports)
were not readily available. Consequently, we adopted reective
measurements from De Luca and Atuahene-Gima [45] to evaluate
the rms performance on new product development. CEOs
responded using a ve-point Likert-type scale that ranged from
1 (strongly disagree) to 5 (strongly agree).
To validate the measurement of product innovation performance, another set of performance data was collected from
external stakeholders during the second wave (T2). Specically, for
each rm, we approached representatives of one group of
stakeholders, such as the rms customers, shareholders, or local
government ofcials who are familiar with or tasked with
monitoring the rm. We asked them to complete a short
questionnaire based on their knowledge of the rm. The
questionnaire contained two sections. The rst section measured
the extent to which the respondent is familiar with the rm (from
1, not familiar at all, to 5, very familiar). The second section
asked respondents to evaluate the rms product innovation
performance using the same scale that was employed in the CEOs
questionnaire. The responses to the rst section indicated
moderate to high, and thus acceptable, familiarity with the rm
in question. We then correlated the stakeholders and the CEOs
evaluations of product innovation performance and found that
they are correlated to a small-to-medium extent (r = .19, p  .05).
Given that the correlation is positive and signicant, we considered
the CEOs evaluations to be credible measures of their respective
rms product innovation performance.

650

Y. Chen et al. / Information & Management 52 (2015) 643657

4.2.5. Control variables

We controlled for rm age, rm size, ownership structure,
industry type, and past performance because of their potential
effects on CE and product innovation performance. We included
rm age as a control variable because older rms can enjoy an
experience-based advantage that enables them to sustain growth
better than younger rms. We measured rm age using the
number of years the rm existed. We included rm size because
larger rms may have more resources than smaller rms, which
may affect the relationship between CE and product innovation
performance. We utilized a categorical description of the rm size
following Judge and Elenkov [34]. Specically, we classied rms
with less than 100 employees as small, rms with more than
100 employees but less than 1000 employees as medium, and
rms with more than 1000 employees as large. We included
ownership structure as a binary control variable because in China,
state-owned enterprises are generally less willing to take risks and
less proactive than non-state-owned enterprises [72]. We controlled for industry sub-types because they can capture different
environmental dimensions, which can impact rms performance.
We included past performance as a control because it can inuence
the strategic goals set by the top management team, thus
inuencing product innovation performance. We adopted four
measurement items from Judge and Douglas [35]. CEOs responded
to this measure. A ve-point Likert-type scale, ranging from 1 (far
below the average) to 5 (far above the average), was used.
Cronbachs alpha for this measure was .73, which is above the
threshold level [27]. To conrm the validity of the past
performance measure, we asked a second set of external
stakeholders, who were different from the set that evaluated
product innovation performance, to answer the same questions on
past performance that were posed in wave one (T1). The correlation
between stakeholders evaluations and CEOs evaluations is
positive and signicant (r = .41, p  .01), supporting the validity
of the respondents evaluation.
4.3. Data analysis and results
We used the partial least squares (PLS) method to test our
research model because it allowed latent variables to be modeled
as formative or reective constructs and it can accommodate nonnormality with small to medium sample sizes. In this study, the
construct of IT capabilities was a formative second-order construct,
CE was a reective second-order construct, and competitive
intensity and product innovation performance were both reective
rst-order constructs. SmartPLS 2.0 was used to analyze the
research model.
4.3.1. The measurement model
We assessed construct reliability with PLSs internal consistency measure. Table 3 shows that all values were above .70,
indicating acceptable reliability. We also tested convergent
validity by examining the average variance extracted (AVE) from
the measures. Table 3 shows that the values of the AVEs ranged
from .51 to .79 and, thus, are all above the threshold value of .5. In
addition, we used conrmatory factor analysis to test the measures
of our research model. Table 4 shows the tests weights and
loadings. All the measures displayed signicant loadings, indicating acceptable convergent validity. Finally, we tested the
discriminant validity of the measures. We adopted the guidelines
suggested by Kline [40] to examine factor correlations and those
suggested by Gefen et al. [24] to test whether the square root of the
AVE for each construct was larger than its correlation with other
factors. The test did not detect any anomalies. Table 5 summarizes
the major descriptive statistics and the correlations derived from
the sample. As shown in Table 5, all construct correlations were

Table 3
Results of conrmatory factor analysis.
Measures

Items

Composite
reliability

Average
variance
extracted

IT infrastructure exibility
IT integration
IT business alignment
IT management
New product development
Business venturing
Self-renewal
Competitive intensity
Product innovation performance

4
3
6
6
5
4
4
3
5

.90
.88
.86
.90
.93
.84
.86
.92
.93

.69
.70
.51
.60
.73
.57
.61
.79
.73

less than .8 and the square root of the AVE for each construct was
higher than the correlation between any pair of factors, conrming
the discriminant validity of the scale1. To conclude, all constructs
displayed adequate discriminant validity2.
4.3.2. The structural model
With a psychometrically acceptable measurement model, we
proceeded to test the proposed hypotheses using SmartPLS 2.0. The
results of the analysis are depicted in Fig. 2.
H1 was supported (path coefcient was .32 at p  .01),
demonstrating that IT capabilities improved a rms CE, which
included aspects such as business venturing, new product
development, and self-renewal. H2 was also supported (path
coefcient was .27 at p  .01), demonstrating that CE enabled rms
to leverage business venturing, new product development, and
self-renewal to enhance product innovation performance.
Consistent with our conceptualization of the intermediary role
of CE, we employed the procedures recommended by Baron and
Kenny [3] to examine H3, i.e., whether CE mediated the effect of IT
capabilities on product innovation performance. Recent studies in
various research elds (e.g., [41]) argued that condition 1 of the
classic mediation analysis (i.e., IT capabilities and product
innovation performance) can be relaxed without hampering the
validity of the mediation analysis. Therefore, we followed this
suggestion by testing the mediation role of CE. Full mediation is
present when the following conditions are met: a path from the
independent variable (i.e., IT capabilities in our study) to the
dependent variable (i.e., product innovation performance) is not
signicant, while paths from the independent variable to the
mediator (i.e., CE) and from the mediator to the dependent variable
are both signicant. Partial mediation is present when all three
paths are signicant. After linking IT capabilities with product
innovation performance based on Fig. 2, the path from IT
capabilities to product innovation performance was not signicant
(path coefcient was .06 at p > .05), and the other two paths were

1
Table 5 showed that the correlation between new product development and
product innovation performance was .31. Thus, the test of discriminant validity
empirically conrmed the distinction between these two constructs.
2
After observing that some constructs have high correlations (.5), we
performed an additional test to conrm discriminant validity. Based on the work
of Chang and King [11], we tested the signicance of the chi-square differences
between the original model (i.e., the model with the correlation between the two
factors free of control) and the constrained model, in which the two factors were
united as one construct (i.e., the correlation between the two factors was set as 1).
All the chi-square differences were signicant: IT infrastructure exibility and IT
management (Dx2/Dd.f. = 100.81, p  .05), IT business alignment and IT management (Dx2/Dd.f. = 86.87, p  .05), IT business alignment and IT integration (Dx2/
Dd.f. = 30.35, p  .05), innovation and venturing (Dx2/Dd.f. = 33.08, p  .05),
innovation and renewal (Dx2/Dd.f. = 88.17, p  .05), and venturing and renewal
(Dx2/Dd.f. = 2.75, p  .10). Considering the three methods above, we concluded
that all constructs displayed adequate discriminant validity.

Y. Chen et al. / Information & Management 52 (2015) 643657

Table 4
Factor loadings, weights, and t-values.
Model construct

Measures

Factor
loading

Weights
of the
measures

t-Value

IT infrastructure
exibility

ITIF 1
ITIF 2
ITIF 3
ITIF 4
ITI 1
ITI 2
ITI 3
ITBA 1
ITBA 2
ITBA 3
ITBA 4
ITBA 5
ITBA 6
ITM 1
ITM 2
ITM 3
ITM 4
ITM 5
ITM 6
NPD 1
NPD 2
NPD 3
NPD 4
NPD 5
BV 1
BV 2
BV 3
BV 4
SR 1
SR 2
SR 3
SR 4
CI 1
CI 2
CI 3
PIP 1
PIP 2
PIP 3
PIP 4
PIP 5

.80
.89
.79
.84
.84
.85
.82
.73
.72
.68
.68
.72
.74
.73
.74
.75
.79
.81
.81
.79
.89
.85
.89
.84
.72
.80
.79
.70
.75
.77
.80
.81
.88
.89
.90
.83
.78
.91
.86
.88

.28
.33
.29
.31
.41
.38
.41
.25
.24
.22
.22
.23
.24
.20
.20
.21
.21
.23
.24
.24
.24
.22
.23
.24
.33
.35
.34
.31
.28
.29
.35
.35
.33
.39
.41
.20
.17
.27
.23
.29

20.83
43.90
19.71
27.61
28.84
25.70
22.40
14.21
11.41
10.15
9.78
11.75
13.52
13.71
14.15
17.32
20.91
21.70
24.02
16.34
43.57
32.50
36.50
26.36
14.63
18.87
18.38
8.85
11.72
15.56
22.61
29.70
22.15
28.20
31.20
23.16
18.28
52.04
30.37
41.39

IT integration

IT business
alignment

IT management

New product
development

Business
venturing

Self-renewal

Competitive
intensity
Product innovation
performance

signicant (path coefcient were .32 at p  .01 and .25 at p  .05,

respectively). We thus concluded that H3 was supported and
consistent with our theorization that CE fully mediated the effect
of IT capabilities on product innovation performance.
H4 predicted a positive moderating effect of competitive
intensity on the relationship between CE and product innovation
performance. H5 postulated a positive moderating effect of
competitive intensity on the relationship between IT capabilities
and CE. H4 was not supported (path coefcient was .14, p > .05),
which suggested that competitive intensity did not signicantly
moderate the CEproduct innovation performance relationship for
the rms in our sample. Because the moderating effect was
signicant (path coefcient was .23 at p  .01), we concluded that
H5 was supported and that competitive intensity positively
moderated the IT capabilitiesCE relationship. Fig. 3 presents
the moderation results3.
3
As additional robustness checks, we retested the model using formative
specications of CE. By using PLS software, the result shows that the relationship
between IT capabilities and product innovation performance became nonsignicant (path coefcient is .07, p > .05) when CE was added. The moderating effect of
competitive intensity on the IT capabilities-CE linkage was also signicant (path
coefcient is .19, p  .05) while that on CE-product innovation performance
remained nonsignicant (path coefcient is .09, p > .05). This test yielded
patterns of relationships that are consistent with our reective specication of the
construct of CE.

651

To conrm the moderating role of competitive intensity on the

IT capabilitiesCE relationship, we further tested mediated
moderation using PLSs structural model. In mediated moderation,
the interaction between the independent variable and the
moderator inuences the dependent variable through a mediator
[23]. To this end, we tested whether the relationship between IT
capabilities (the independent variable) and CE (the mediator) was
moderated by competitive intensity (the moderator) and whether
CE, in turn, inuenced product innovation performance (the
dependent variable). Thus, mediated moderation required a
multistep procedure [23] that tested whether the following results
were observed: (1) CE signicantly impacted product innovation
performance, (2) the effect of IT capabilities on CE was signicantly
moderated by competitive intensity, (3) the effect of this
moderating term on product innovation performance was
signicantly mediated by CE, and (4) the direct effect of CE
decreased in magnitude in the presence of the interaction term.
The analysis showed that steps 1 and 2 received empirical support.
Next, a mediation test (Sobel test statistic 2.06 at p  .05)
conrmed that CE signicantly mediated the effect of the
interaction term on product innovation performance. The interaction of IT capabilities and competitive intensity had no signicant
direct impact on product innovation performance. Finally, adding
the interaction term decreased the magnitude of the direct effect of
competitive intensity on CE (path coefcient decreased from .18 to
.16, both at p  .01) after controlling for the interaction between CE
and competitive intensity. We noted that adding the moderator
increased the R2 for CE from 41% to 46% (DF = 8.11 at p  .01),
suggesting that it provided explanatory power to the model. Thus,
all the conditions for mediated moderation were met.
Finally, we examined the inuence of the control variables. The
results showed that the effect of ownership structure was negative
and signicant (path coefcient was .13 at p  .05), suggesting
that state-owned rms tended to engage in fewer CE activities.
They also demonstrated that past performance was positively and
signicantly related to CE (path coefcient was .33 at p  .01). This
result suggested that past successful innovation tended to spur
current and future entrepreneurial activities. The remaining
control variables did not have a coefcient that signicantly
differed from zero.
5. Discussion
Prior research regarding IT business value has largely focused
on the role of IT in generating tangible outcomes for rms, such as
enhanced output productivity, reduced labor costs and increased
nancial or market performance (e.g., [8]). More recently,
practitioners have considered IT to play an important role in
corporations innovation (e.g., [73]). According to a recent Gartner
CIO Agenda survey4, creating new products and services (innovation) has been ranked No. 4 among CIOs top business priorities,
which has signicantly risen from its No. 10 ranking ve years
earlier5. With the emergence of new IT, such as mobile
technologies, cloud computing and data, analytics and their
various applications in business, CIOs and IS leaders increasingly
concentrate on the role of IT as a critical enabler of rm innovation.
However, the relationship between IT and organizational innovation, especially the role of IT in product innovation, is not well
understood. The current study was motivated by the desire to shed
light on this hitherto elusive role. The key ndings from this study
contribute to the IT business value literature by explaining how IT
4
Source: http://www.gartner.com/newsroom/id/1897514, retrieved on Dec
29th, 2014.
5
Source: http://www.gartner.com/newsroom/id/501189, retrieved on Dec 29th,
2014.

Y. Chen et al. / Information & Management 52 (2015) 643657

652
Table 5
Correlation between constructs.

1. IT infrastructure exibility (T1)

2. IT integration (T1)
3. IT business alignment (T1)
4. IT management (T1)
5. New product development (T1)
6. Business venturing (T1)
7. Self-renewal (T1)
8. Competitive intensity (T1)
9. Product innovation performance (T2)
10. Past performance (T1)
11. Firm sizea
12. Firm age
13. Ownership structureb
Mean
S.D.

10

11

12

.83
.40
.47
.57
.24
.31
.38
.11
.27
.28
.09
.01
.06
3.79
.64

.84
.58
.39
.37
.23
.29
.01
.11
.23
.07
.03
.01
3.68
.71

.71
.53
.36
.33
.33
.10
.22
.26
.08
.03
.03
3.64
.63

.78
.28
.31
.35
.10
.23
.32
.18
.01
.06
3.52
.61

.85
.64
.51
.19
.31
.26
.02
.11
.11
3.35
.83

.75
.71
.30
.31
.46
.08
.11
.18
3.76
.65

.78
.39
.36
.59
.06
.04
.08
3.77
.67

.89
.19
.28
.04
.02
.03
4.06
.80

.85
.31
.19
.04
.06
3.72
.73

.76
.09
.02
.05
3.82
.63

.03
.13
1.72
.69

.27
8.48
5.04

13

.67
.47

Note: The values above .17 are signicant at p  .05. The shaded numbers in the diagonal row are square roots of the average variance extracted.
a
Coding: small-sized = 1; medium-sized = 2; large-sized = 3.
b
Coding: state owned = 1; non-state owned = 0.

capabilities contribute to product innovation. Specically, the

study shows that IT capabilities enable CE, which is critical to
enhanced product innovation performance. The study further
shows that this important enabling role is amplied under
conditions of intense competition in the rms external business
environment.
5.1. Implications for research
With this studys main purpose of addressing the relationship
between IT and innovation, a CE framework has been applied to
investigate how IT contributes to rms product innovation. By
proposing and verifying the mediating role of CE in IT-enabled
innovation, this study enhances our understanding about IT and
the business value of IT. Based on a matched survey sample from

IT infrastructure
flexibility

IT integration

Control variables
Firm size (-0.03, 0.16)
Firm age (-0.08, 0.04)
Ownership structure (-0.08, 0.08)
Past performance (0.30**, 0.13)
Dummy1-Basic metal (0.22, -0.09)
Dummy2-Non-metallic mineral (0.12, -0.22)
Dummy3-Fabricated metal (0.14, -0.07)
Dummy4-Thermal power (0.15, -0.16)
Dummy5-Chemicals (0.03, 0.03)
Dummy6-Energy (0.10, -0.11)
Dummy7-Mining (0.13, 0.03)
Dummy8-Building materials (0.17*, 0.01)

0.29**

R2 = 0.39

0.35**

IT capabilities
H1: 0.32**

IT business
alignment

Corporate
entrepreneurship

R2 = 0.22

H2: 0.27**

Product innovation
performance

0.20**
0.87**

IT management

138 manufacturing rms in Northern China, we nd evidence that

supports our hypotheses that CE fully mediates the relationship
between IT capabilities and product innovation performance and
that competitive intensity positively moderates the relationship
between IT capabilities and CE; that is, under conditions of
intensively competitive environments, rms tend to rely more on
IT capabilities to support their CE activities. These ndings
contribute to the literature on business value of IT and the
foundational literature of CE. Below, we elaborate on the
implications of these ndings.
This study is one of the rst academic efforts to address ITenabled innovation, and it contributes to the relevant literature by
building a model of the ITinnovation relationship. Although
specic information technologies and applications have been
found to play a signicant role in supporting product innovation in

0.89**

0.83**

0.41**

New product
development

Business
venturing

n = 138; ** p .01; * p .05 (two-tailed).

Fig. 2. Results of PLS analysis without moderating effects.

Self-renewal

Y. Chen et al. / Information & Management 52 (2015) 643657

653

Control variables
Firm size (0.01, 0.12)
Firm age (-0.08, 0.05)
Ownership structure (-0.13*, 0.07)
Past performance (0.33**, 0.14)
Dummy1-Basic metal (0.21, -0.09)
Dummy2-Non-metallic mineral (0.10, -0.22)
Dummy3-Fabricated metal (0.10, -0.07)
Dummy4-Thermal power (0.10, -0.16)
Dummy5-Chemicals (-0.15, 0.03)
Dummy6-Energy (0.06, -0.11)
Dummy7-Mining (0.08, 0.03)
Dummy8-Building materials (0.15*, 0.01)

IT infrastructure
flexibility

IT integration

Competitive
intensity
0.29**
H5: 0.23**

0.29**

R2 = 0.23
Product innovation
performance

0.28**

0.20**
0.87**

IT management

H4: -0.14ns

Corporate
entrepreneurship

IT capabilities
IT business
alignment

R2 = 0.46

0.35**

0.89**

0.83**

0.41**

New product
development

Business
venturing

Self-renewal

n = 138; Solid lines are significant paths, dotted lines are non-significant paths
**
p .01; * p .05; ns, non-significant (two-tailed)
Fig. 3. Results of PLS analysis with moderation effects.

different ways, our understanding of the mechanism through

which IT contributes to innovation remains fragmented; thus, this
mechanism requires further investigation. Our work contributes to
the ITinnovation literature by adopting a perspective on IT that
focuses on the combination of hardware, software, technical
human resources, and applications. Furthermore, this study
contributes by focusing on the interaction between IT resources
and other organizational resources and introducing the concept of
IT capabilities to the investigation of IT-enabled innovation.
This integrated perspective on IT helps us examine the roles of
rm-level IT competence in generating product innovation rather
than isolating the impacts of IT. This is aligned with the emerging
facts that information technologies and applications are closely
embedded in enterprise-wide business activities, processes and
routines within contemporary rms. Furthermore, although
specic IT resources are implemented and developed in an isolated
form, they interact with each other and support business activities
jointly. Thus, a broader view on the impacts of IT is needed. The
nding thus extends the ITinnovation relationship literature by
viewing IT capabilities in an integrated way, allowing for the
holistic consideration of the impacts of IT infrastructure exibility,
IT integration, IT business alignment, and IT management.
In addition to taking an integrated approach to examining the
impacts of IT capabilities as a whole on CE and product innovation,
this study found that IT management has the greatest weight
among the four dimensions of IT capabilities in the proposed
model. This result implies that IT management could likely play a
more signicant role in IT-enabled innovation compared to other
IT capabilities dimensions. With advanced information technologies and various applications implemented to support a variety
of business activities, IT management capability becomes
increasingly critical for the success of IT strategy. When a rm

implements more heterogeneous systems, applications and

functions to support business innovation, it is critical for the
rm to possess sophisticated IT management capability to
integrate and coordinate various IT resources and maintain the
alignment between IT and business demands.
Furthermore, this study addresses the unsolved question of how
IT, which was traditionally considered a fungible tool for reducing
labor costs and increasing efciency by automating and standardizing human activities and routines, can also enable responsiveness,
exibility, agility, and innovation performance. The ndings of this
study help to address this question by highlighting two theoretical
insights. First, CE fully mediates the impacts of IT capabilities on a
rms product innovation. Both IT capabilities and CE, as rm-wide
capabilities, reside or are embedded in various business routines,
activities and processes across different functional departments and
units. In particular, CE is considered the aggregated enterprise-wide
effort dedicated to recognizing and exploiting new opportunities.
Second, a rms IT capabilities signicantly inuence CE within the
rm. CE reects a rms ability to identify and respond to
opportunities using resources. As elaborated in the previous section,
effective CE activities signicantly rely on the availability of relevant
and timely information, rm-wide integration, and effective
communication, which is closely aligned with ITs main attributes.
This alignment underlying IT and entrepreneurial activities provides
strong rationale for linking IT with CE. The nding of the relationship
between IT capabilities and CE in this study contributes to the
literature by addressing the aforementioned question of the IT
innovation relationship with a solid theoretical foundation and
empirical support.
Recent studies emphasize the business value of IT emerging
through its complementarity and integration with business
strategies, organizational structures, and competencies (e.g., [4]).

654

Y. Chen et al. / Information & Management 52 (2015) 643657

Following this emergent perspective on IT value, our study proposes

that a CE framework is appropriate for investigating the impacts of IT
on rm product innovation. Findings from this work further
demonstrate that IT capabilities exert a positive and signicant
impact on product innovation performance, albeit indirectly, via CE.
This result suggests that encouraging and supporting CE activities is
an important mechanism through which rms can leverage IT
capabilities to enhance product innovation performance. This
nding also reafrms the notion that IT capabilities do not directly
determine rm-level outcomes [4]. Rather, intermediaries such as
CE are needed for the realization of the strategic potential of IT
capabilities, translating infrastructure exibility, information collecting and sharing capacities, communication channels, and
integration abilities into business outcomes.
Moreover, this paper theorizes a contingent relationship
between IT capabilities and CE activities. Specically, the study
nds that competitive intensity augments the positive inuence
of IT capabilities on CE. This result suggests that IT-enabled CE
activities are contingent upon the competitive conditions of the
market. In other words, while effective CE activities generally
depend on strong IT capabilities, such dependence becomes more
acute when the rm operates under conditions of heightened
competition. In such an environment, access to relevant and
timely information, the ability to share information across the
organization and with business partners, the capacity to
communicate in real time and over multiple channels, and the
ability to transform and integrate disparate business units that
are needed to conceive and execute innovative ideas are even
more important. Surprisingly, the proposed moderating role of
competitive intensity on the CEproduct innovation performance
relationship is not supported by the data of this study. This
outcome may stem from the fact that in competition-intensive
environments, frequent changes of internal business practices
are required, which tend to limit the return on CE activities
[30]. In particular, an intensively competitive environment can
spur entrepreneurial activity but also reduce the likelihood that
rms realize benets from entrepreneurship and innovation. The
inability to generate novel ideas and translate them into nancial
success might counterbalance the positive increase in entrepreneurial activity, thus making the overall moderating effect
nonsignicant.
5.2. Implications for practice
This study also has a number of important implications for
management. First, our results demonstrate that IT capabilities
contribute to the product innovation performance of a rm, albeit
in a circuitous way. Executives who perceive the return on IT to be
vague and inconsistent would likely see a more consistent path by
focusing on ITs role in supporting entrepreneurial and innovation
activities. Rather than seeking to link IT directly to rm-level
nancial outcomes, senior management should shift their
attention to the salient role of IT in enabling intermediary
factors. Such a shift in perspective would be helpful for making
informed IT investment decisions. The elaborated role of IT in
enabling rm innovation found in our study is also consistent
with the ndings of the Society for Information Managements
(SIM) 2014 IT Trends Study, which identied that the IT priorities
among IT managers have been shifted from IT impacts in
increasing efciency and reducing cost to more strategic and
organizational issues such as innovation [36]. Recognizing the
role of IT in enabling innovation, senior managers should
reconsider the value of IT and prioritize IT investments with
the potential to enable organizational innovation. In particular,
more attention needs to be paid to IT resources and applications
that would help to (1) collect and analyze information on the

market and customers, (2) share real-time information with their

business partners, (3) reshape and integrate disparate business
activities, and (4) utilize the information to support innovationrelated strategic choices. Considered as evidence, more contemporary companies leverage mobile applications, web-based
applications to collect data and information about customer
demands and preferences and use business intelligence or
analytics technologies to interpret these data to improve product
innovation.
Second, our results suggest that the value of IT largely
depends on its ability to enable and improve CE activities. With
enhanced IT-enabled CE, rms can benet from improved new
product development processes and more effective business
venturing and self-renewal efforts, which in turn improve
product innovation performance. In light of these results,
managers should strive to channel IT capabilities toward
important entrepreneurial activities. To achieve this objective,
IS leaders should interact closely with business executives who
oversee and sponsor CE activities to achieve close alignment
between IT and their rms business strategy. More efforts need
to be paid to form a shared deep understanding among both
business and IT departments about the promise of IT in
supporting corporate entrepreneurial activities, such as the
development of new products, new ventures, and new markets
or channels. Furthermore, senior management needs to explore
novel information technologies and develop IT strategies that
can support the rms entrepreneurial abilities. IT capabilities,
including exible IT infrastructure, IT integration, IT business
alignment and strong IT management skills, should be developed
to enhance the collection and sharing of customer information
and preferences, communication and collaboration within and
across companies boundaries, and exploitation of market
intelligence to maintain rms environmental alertness and
agility. With more advanced consumer-oriented technologies
and leading web-based systems in rms, it is important to ensure
strong IT management skills to facilitate interaction with
customers in innovation processes. In addition, rms need
strong IT management skills to control security and privacy
issues when web-based applications and cloud computing
technologies are increasingly implemented in the rms and
increase the rms exposure to risk while potentially reducing
their control over certain IT resources.
Finally, the ndings reveal that competitive intensity strengthens the positive inuence of IT capabilities on CE activities. In
particular, the results suggest that rms that operate under highly
competitive conditions should focus their efforts on the development and maintenance of their IT capabilities to maximize the
entrepreneurial return on IT investment. For example, if a rms
industry is highly competitive (e.g., characterized by intense
promotion wars), the rm could leverage its IT capabilities to
introduce a large number of differentiated new products to the
market to set itself apart from the competition by means other
than costs. Managers should carefully assess the external business
environments competitive intensity to manage their IT-related
activities more effectively.
5.3. Limitations and future research
Although the study reported in this paper is theoretically
grounded and the results are based on a matched survey sample of
representative rms, it has several limitations that should be
acknowledged. First, the data for the current research were
obtained from manufacturing rms in Northern China, raising the
possibility that the results may not be directly applicable to certain
Western countries. Despite this caveat, with the exception of the
variable ownership structure, which may be unique to China,

Y. Chen et al. / Information & Management 52 (2015) 643657

there appears to be no reason why the model could not be

applicable to other contexts. Furthermore, our model could be
relevant to rms in other emerging markets (e.g., Brazil and India).
Moreover, as more non-Chinese rms shift some of their
operations to China or collaborate with Chinese business partners,
the ndings of this study could be of importance to many rms
irrespective of the physical locations of the headquarters or the
exchanges on which they are listed. Second, our data sources were
drawn from manufacturing rms and the possibility of contextual
differences suggests that the role of IT capabilities in supporting CE
activities and product innovation should be examined in other
industries. Third, in this study, we took a matched survey sample
approach by asking single key informants (per occupational
position) to provide data for the main constructs in our model.
According to established guidelines, our informants were deemed
to be capable of providing useful responses. Nevertheless, future
studies could consider using multi-informant designs to reexamine our model. Fourth, we adopted existing scales to measure
IT capabilities as a formative second-order construct with four
rst-order factors. Although these four dimensions of IT capabilities were previously used successfully and are likely to explain
variability in CE activities (e.g., [39,57]), future research may
extend the portfolio of IT capabilities covered in this study by
incorporating other IT capabilities. Finally, although our study
collected data about product innovation performance one year
after the collection of the antecedent constructs, we cannot
conclude causal relationships with absolute certainty. More
evidence based on longitudinal research is needed to further
determine causation.

Appendix A (Continued )
enior IT executive questionnaire
IT infrastructure
exibility Bhatt
et al. [8]

IT integration
Rai and Tang
[55]

IT business
alignment
Kearns and
Lederer [38]

IT management
Bharadwaj
et al. [6]

6. Conclusion
This paper nds that IT capabilities positively inuence a rms
CE and, in turn, lead to improved product innovation performance. It
thus sheds light on the value of IT capabilities for CE activities and
product innovation performance. The PLS structural equation
modeling approach used in this study further suggests that
competitive intensity positively moderates the relationship between IT capabilities and CE. Overall, this paper contributes to the
development of more robust entrepreneurship and IT-focused
theories and to our understanding of the business value of IT.

CEO questionnaire
Corporate
entrepreneurship
Heavey et al. [29]
New product
development

Acknowledgements
This project was sponsored by the National Natural Science
Foundation of China (no. 71273160), the Shantou University
Cultivation Fund for National Programs, the European Regional
Development Fund (European Union) (ECO2010-15885 and
ECO2013-47027-P) and the Government of Spain (Research
Projects ECO2010-15885 and ECO2013-47027-P), the Regional
Government of Andalusia (Research Project P11-SEJ-7294), the
Campus of International Excellence BioTic of the University of
Granada (Research Project CEI2014-MPTIC1), and the School of
Human Resources and Labor Relations of the University of Granada
(Research Project SHRLR2015-11).

Appendix A
Senior IT executives and CEO questionnaires.
enior IT executive questionnaire
IT capabilities

To what extent do you agree with the following

statements (1 = Strongly disagree to
5 = Strongly agree)?

655

Business venturing

Self-renewal

Competitive
intensity
Jaworski and
Kohli [33]

ITF 1: our information systems are scalable

ITF 2: our information systems are compatible
ITF 3: our information systems are adopted to
share information
ITF 4: our information systems are modular
ITI 1: our rm transfers data with our suppliers
ITI 2: our rm connects our systems with our
suppliers systems, which allows for the
sharing of real-time information with our
suppliers
ITI 3: our rm combines information across
different suppliers to support decision making
ITA 1: IS plans reect the business plan goals
ITA 2: IS plans support the business strategies
ITA 3: IS plans recognize external business
environment forces
ITA 4: business plans refer to IS Plans
ITA 5: business plans refer to specic information
technologies
ITA 6: business plans have reasonable
expectations of IS
ITM 1: effectiveness of IT planning in our rm is
better than that of other rms in our industry
ITM 2: IT project management practices in our
rm are better than that in other rms in our
industry
ITM 3: planning for security control, standard
compliance, and disaster recovery in our rm is
better than that in other rms in our industry
ITM 4: system development practices in our rm
are better than those in other rms in our
industry
ITM 5: consistency of IT policies throughout the
enterprise in our rm is better than that in other
rms in our industry
ITM 6: IT evaluation and control systems in our
rm are better than those in other rms in our
industry
To what extent do you agree with the following
statements (1 = Strongly disagree to
5 = Strongly agree)?
CE1: our rm is spending heavily (well above the
industry average) on product development
CE2: our rm is introducing a large number of
new products to the market
CE3: our rm is acquiring signicantly more
patents than its major competitors
CE4: our rm is pioneering the development of
breakthrough innovations in its industry
CE5: our rm is spending on new product
development initiatives
CE6: our rm is entering new markets
CE7: our rm is establishing or sponsoring new
ventures
CE8: our rm is nding new niches in current
markets
CE9: our rm is changing its competitive
approach (strategy) for each business unit
CE10: our rm is reorganizing operations, units,
and divisions to ensure increased coordination
and communication among business units
CE11: our rm is redening the industries in
which it competes
CE12: our rm is introducing innovative human
resource programs
CE13: our rm is the rst in the industry to
introduce new business concepts and practices
To what extent do you agree with the following
statements (1 = Strongly disagree to
5 = Strongly agree)?
CI1: there are many promotion wars in our
industry
CI2: any product that a company can offer, others
can easily match
CI3: price competition is a hallmark of our
industry

656

Y. Chen et al. / Information & Management 52 (2015) 643657

Appendix A (Continued )
enior IT executive questionnaire
Product innovation
performance De
Luca and
Atuahene-Gima
[45]

Past performance
Judge and
Douglas [35]

To what extent do you agree with the following

statements (1 = Strongly disagree to
5 = Strongly agree)?
PIP1: product and service development in our
rm has achieved market share relative to the
rms stated objectives
PIP2: product and service development in our
rm has achieved sales relative to stated
objectives
PIP3: product and service development in our
rm has achieved return on assets relative to
stated objectives
PIP4: product and service development in our
rm has achieved return on investment related to
stated objectives
PIP5: product and service development in our
rm has achieved protability relative to stated
objectives
How does your rms performance during the last
two or three years compare to that of all other
competitors (1 = Far below the average to
5 = Far above the average)?
PP 1: protability
PP 2: return on investment
PP 3: market share
PP 4: sales growth

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Assoc. Inf. Syst. 33, 2013, (Article 9).
Dr. Yang Chen is a full professor in School of Business
Administration, Southwestern University of Finance
and Economics in China. He has published research
papers in Journal of Business Ethics, Human Resource
Management, European Journal of Information Systems,
Communication of the AIS, and Journal of Computer
Information Systems. His current research interests
include corporate sustainable development, IT business
values, human resource management, and so on.

657
Dr. Yi Wang is a full professor in Business School,
Shantou University in China. She has published
research papers in European Journal of Information
Systems, Communication of the AIS, and International
Journal of Information Management. Her current research interests include IT business value, mobile
technology applications and etc.

Dr. Saggi Nevo is an associate professor in the

Information Technology Management Department at
the University at Albany. His work has been accepted or
published in journals such as MIS Quarterly, The DATA
BASE for Advances in IS, Communications of the AIS,
International Journal of Electronic Commerce, and Journal
of Strategic Information Systems. His current research
interests include open source software, social computing, and virtual worlds.

Dr. Jose Benitez-Amado is an associate professor in the

School of Human Resources and Labor Relations, and
the School of Business and Economics, University of
Granada, Spain. Jose is also the Associate Dean of
Undergraduate Programs for the School of Human
Resources and Labor Relations. He has published his
research in the European Journal of Information Systems,
Information Technology & Management, and International Journal of Information Management. He currently
serves as Associate Editor for the European Journal of
Information Systems, and Information Technology &
Management.

Dr. Gang Kou is a full professor in School of Business

Administration, Southwestern University of Finance
and Economics in China. He has published research
papers in Information Sciences, Decision Support Systems,
and International Journal of Information Technology &
Decision Making. His current research interests include
big data and service innovation.