Seminar in strategic management

(Stra705)

The effect of the IT-enabled resources on the sustainable competitive

advantage

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Table of content
1. Introduction
2. Company resources-based view and Competitive advantage
3. IT business Value
3.1. Information technology resource and its importance
3.2. When exactly IT doesnt matter?

3.2.1.

Innovate and spend through the Engagement with IT fashion

3.2.2.

Or just follow and focus on the vulnerabilities and risks

3.2.3. IT management Rules

4. Investing on IT-enabled resources and the sustainable competitive advantage
4.1 synergy might be the result from Emergent capabilities
4.2 From synergistic IT-enabled resources to the sustainable competitive advantage

5. Conclusion
6. References

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1. Introduction
Strategic management has evolved to the point that organization primary objective is
to operate successfully in a dynamic and complex environment. And to gain
competitive edge organizations should be less bureaucratic, more flexible and has an
inimitable capabilities or resources that are vague for their competitors to imitate
(Bruque, Moyano, Vargas and Hernandez, 2003; W. Golden & P. Powell, 2004; and
Jim Andersn, 2007). Since IT has been an integral resource in modern organization
that has contributed a lot in their performance (Kohli and Grover 2008), it has a
valuable strategic necessity for any organization (Clemons and Row 1991), also IT
business value comes from its ability to be exhibited with other IT-enabled resources
to generate extraordinary capabilities from which the Competitiveness competencies
can be attained and sustained (Nevo and Wade, 2010). In my literature I will go
through a lot of discussions among researchers to synthesize a conclusion conducive to
identifying the link between IT assets and sustainable competitive advantage for any
organization. The key factor here relates not to the individual capabilities of
organizational resources or IT assets in isolation, but rather to the emergent capabilities
that arise from their combination (Nevo and Wade, 2010).
In the coming sections illustration will be supported to explain the resource-based
view background of the capabilities, resources, core competences, and how
competitive advantages could be attained from RBV, Then studying the IT resource
and its business value, Then narrowing down to the inhabitation of the IT resources
with the firm resources, called the IT-enabled resources, which could generate synergy
and affect the Firms functional strategy if the management rules applied. Finally the
relation between IT-enabled assets and the firm competitive advantage sustainability
could be explored. After going through these sections we will be able to answer the
main question of this study which is:
Does investing on IT-enabled assets create competitive advantages for the hosting
organization?

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2. Firms' resources-based view and competitive advantage

Figure3 (Nevo and Wade, 2010)

The firms strategy can be defined as the rational process designed to achieve a
competitive and sustainable advantage of one organization over another. It includes the
effective development, execution and synchronization of separate strategies for
individual firms functions such as production, marketing and finance (Borlakis, 2006).
The drivers of sustainable competitive advantage are a main point of debate in the
several researches, in order to explain the competitive advantage sustainability we
should first go through some basics and definitions. The resources are the main assets
for any organization they are the main building blocks or stocks of available factors
that are owned or controlled by the firm (Amit and Schoemaker, 1993: 35). Resources
have been termed as assets, strengths and weaknesses and stocks of available factors
(Mark Colgate, 1998). They include physical like machines, human such as employees
and their skills, and organizational assets such as culture and reputation (Wheelen,
Thomas L. and Hunger, J. David, 2008). Capabilities represented by the organization
ability to exploit these resources or firm's capacity to deploy resources, or what firms
can do as a result of teams or resources combined together. Examples of capabilities
include product development, market research, fast development cycles and brand
management (Amit and Shoemaker, 1993).

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Ray et al. (2004) has defined them both as resource or a capability refers to the
tangible or intangible assets firms use to develop and implement their business
strategies, while business processes are actions firms engage in to accomplish some
business purpose or objective.'
The core competences of any organization are the collection of integrated capabilities
that the company can do exceedingly and can capture value from it by excluding rivals
from them, and when these core competences and capabilities are superior for the
organization's competitors, then they are called distinctive competences and they may
generate competitive advantages for this organization (Adner and Zemsky, 2006;
Wheelen, Thomas L. and Hunger, J. David, 2008). Before we go through the Effect of
the Information technology on the firms competitive advantages and how it can be
aligned with the firms business strategies and functional strategies we should define
the firms business and functional strategies. The firms business strategies as
Hemphill (2003) has argued, includes the Competitive approach (fighting in the
market with your competitors) or the cooperative strategy, an organizations attempt to
achieve its objectives through cooperation (rather than competition) with other
organizations, focuses on the benefits to be acquired through cooperation and how to
manage the cooperation as to realize them. The function strategies are the strategies
followed in each department to meet the firms business and corporate strategies.

RBV researches synthesis general hypothesize that, first if the firm possesses and
exploits resources and capabilities that are both valuable and rare, it will attain a
competitive advantage. In other words, firms whose resources and capabilities have
great value will likely attain bigger competitive advantages over firms whose resources
and capabilities are of small value, who will at best attain only minor competitive
advantages (Scott L. Newbert, 2008). Makadok (2001) contends that firms can create
competitive advantage by both picking better resources than their competitors and also
exploiting them, with combined them with these resources, more effectively with
appropriate capabilities.

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In a summary, researches have found that if that resources and capabilities are
supposedly not productive in isolation, the key to attaining a competitive advantage is
not to exploit the valuable resource alone or a valuable capability alone (Scott L.
Newbert, 2008), although capabilities ply role in building competitive advantage
(Allan Afuah, 2002), but rather the exploitation of a valuable resource-capability
combination (Scott L. Newbert, 2008) as Possession of a resource alone will never
guarantee competitive advantage (Jim Andersn, 2007). Moreover, the more valuable
the firms resource-capability combinations, the greater the advantage it will enjoy as a
result of their exploitation. Also when the resources or the capabilities are rare and not
available for any company they turn out to be scarce and when organization posses
these scarce resources it helps a lot in building competitive advantage for that
organization that could be sustained (Allan Afuah, 2002; Scott L. Newbert, 2008;
Bruque, Moyano, Vargas and Hernandez, 2003).
Second if these resources and capabilities are also both inimitable and nonsubstitutable, the firm will sustain this advantage (Scott L. Newbert, 2008), Allan
Afuah, (2002)

has elaborated that competitive advantage lies in the firms idiosyncratic

as he said, it means not only exploiting the resources and capabilities to create
customer value from which the competitive advantage could be attained but also the
difficulties for firms competitors to imitate the firms tactics or tacit for conducting
their business which assuring the sustainability for the firms advantages. Indeed,
innovation is the source for the advantage for any firm but the dangerous of imitation
on the firms comes from the huge cost of required resources and time of the
innovation, done to differentiate from the competitors, and finally the imitator just
imitate with a minimum resource cost and time which to some extend gives the feeling
that being imitator could be better than innovator (John and Sons, 2007). But John and
Sons (2007) has mentioned 12 boxes of imitation which are identify the source of the
advantage, avoiding causal ambiguity, product similarity, market repositioning, no
market entry barrier, possessing the same resources, the knowhow of exploiting both
resources and competences, same capabilities, no social complexity, no unique history,
imitate the innovator actions. Those 12 boxes of imitation boxes should be known for
the innovator firm in order not to make it an easy task for their competitors to imitate.
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Like for example supporting the causal ambiguity inside firm's process, as it is
possible that a company has the same resource configuration as its competitors but is
able to distinguish itself from them by arranging its resources in a different way and
securing its competitive advantage.
Third the inter-organizational structure also considered as the main resource of the
firms advantage, as Competitive pressures are forcing organizations to restructure to
become more open, adaptable and flexible (W. Golden & P. Powell, 2004). Indeed the
flexibility may be the critical success factors for the firms to gain competitive
advantages as it improves the quality of the firms internal resources. W. Golden and P.
Powell (2004) have defined the flexibility as The capacity to adapt and defined the
capacity as The power of containing, receiving, experiencing or producing, while
capability is The power to do something. W. Golden & P. Powell, (2004) also have
referenced Evan (1991), in mentioning the flexibility dimensions which are temporal,
how long it takes an organization to adapt. The second is range, the options an
organization has for change that was foreseen and the options available to react to
unforeseen change. The third is intention, whether the organization is proactive or
reactive. The final dimension is focus, whether the flexibility is internal or external.
S. Bruque et al (2003) have added to the inter-organizational structure, the democratic
ownership structure and control as the origin of the competitive advantages, the
ownership structure defines the institutional basis for power relationships between
individuals within the organization and dealings with other organizations and have
mentioned the differences in results achieved by cooperative firms as opposed to no
cooperative firms that work in one given industry. Sterman et al (2007) has added
other sources of competitive advantages the firm may gain, like the learning curve,
internal network, and the first mover in specific market. As the result of the
competitive advantages the firms keep.

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Nevo and Wade (2010) have contributed with the fourth rule which Sais the
attainment of such advantages will enable the firm to improve its short term and long
term performance. Adner and Zemsky, (2006) have develop an approach to analyzing
the sustainability of competitive advantage that emphasizes demand side factors based
on the customer value created. And has extended the added value approach to business
strategy by introducing an explicit treatment of how firms create value for consumers,
his approach to sustainability starts on the supply side with product market
competition and improving technologies
So as synthesis of the above, Nevo and Wade (2010) had summarized the properties of
the firms competitive advantages and IT contribution. They defined the Value as the
organization resources capability to get use or capture market opportunities or avoid
any threats. Rarity is the unavailability for the organization resources for the potential
competitors. Inimitability is a reflection of the costs and difficulties associated with
attempts to duplicate an organizational resource. Non-substitutability is a property that
evaluates the nonexistence of strategically equivalent organizational resources (Barney
1991; Dierickx and Cool 1989; Wernerfelt 1984). And a lot of researches had argued
that information technology (IT) assets do not embody these four properties, and thus
are unable to affect sustainable competitive advantage (Mata etal. 1995; Wade and
Hulland, 2004). But other researchers have proposed that IT may possess these
properties and others said that IT assets are at the center of IT-based RBV.
In the next sections we will go through one of the major resources that help a lot in the
organization internal synchronization which attain the firms functional strategies or
the business strategies that are required. This resource is the information technology
asset (IT) and its business value from merging it with other resources to generate
unique resources that may be the source of synergy and may lead to the firms
competitive advantage.

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3. IT business Value

3.1.

Information technology resource and its importance

Information technology has become an integral part of modern organizations, a lot of

researches have elaborated its contribution to business performance, and recently, the
use of internet has become extremely common as it supports the distribution of
information among the chain members (Kohli and Grover 2008). Wade and Hulland
(2004) Defined IT assets as vastly available, off-the shelf or commodity-like
information technologies that are used to process, save, and distribute information.
Also Bourlakis (2006) defined Information technology (IT) that it includes the data
collection, processing, storage, retrieval, display and communication of information or
data, normally through microprocessor equipment linked to each other through
networks. And, IT has led to an increase in the availability of information on product
movement inside the supply chain. Applications of IT can be used within retail
process include the inventory control systems that can receive, store, pick and move
goods during warehousing operations in an integrated way. Although several IT assets
are customizable, and as such may not be regarded as completely undifferentiated,
they are still considered commodities because they are not protected by isolating
mechanisms (Ray ET al., 2005).
IT asset is the main focus for our literature as, from a lower cost strategy, which
considered some firms main concern; IT can lower the cost of inner processes much
more. Or it can help any organization in delivering differentiated products or services
(e-business). Most managers are interested in the business value of tangible assets
rather than the more abstract notion of resources (Piccoli and Ives 2005). But still the
link between IT assets and corporate level revenues remains elusive (Kohli and Grover
2008). This study proposes that IT assets can be placed in a relationship with certain
organizational resources, where synergistic IT-enabled resources can be created, and
the emergent capabilities can be used to attain and sustain competitive advantage.

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3.2. When exactly IT doesnt matter?

Carr (2003) has argued that the IT is not scarce resources it became ubiquity
commodity not strategic for any organization. As when the companies could have
their edge over their competitors by having or doing something others dont have or
do, IT resource has become affordable and accessible to everyone and it no longer
offers strategic value to anyone. This means that IT by itself couldnt be the
competitive edge for any organization by its own. Carr (2003) continued, IT's power
and presence have expanded, companies have come to view it as a resource ever more
critical to their success, a fact clearly reflected in their spending habits that When a
resource becomes essential to competition but inconsequential to strategy, the risks it
creates become more important than the advantages it provides. Bruque, Moyano,
Vargas and Hernandez (2003) have agreed with Carr (2003) in the concept but with
other opinion which is no matter the amount of IT that the firms use, the cooperative
firms achieve superior competitive advantages better than organizations that dont, and
also added that there is no direct relationship that links between information
technology and sustainable competitive advantage, as he considered the IT just an
instrument but not a rare resource.
In the coming sections we expose some schools with different opinion. One school
contends that spending more and be pioneer in the Information technology innovation
will give the adopter organization an edge over their competitors by reputation,
legitimacy, leader compensation and long run performance enhancement (Ping Wang,
2010). On the other hand the other school opinion is to spend less follow the IT
innovation after its riskiness has been studied and focus on the after set up
vulnerabilities. The third one suggests that after the business innovation conducted you
can spend in IT innovation just to serve it. And finally going through some suggested
information technological management rules.

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3.2.1.Innovate and spend through the Engagement with IT fashion:

An organizational innovation is a structure, practice, or technology new to the

organization adopting it. The process of diffusion is used by innovation to spread along
time among organizations (Rogers, 2003). IT fashion collaboration with an
organization is through creation of a material or informational relationship between the
organization and the fashion of IT innovation, and from the institutional perspective,
organizations inform their stakeholders associated with them by socially approved IT
to obtain legitimacy (Kim and Mahoney, 2006). According to Kim and Mahoney,
(2006) strategic view of the IT We will illustrate more, IT systems increase
coordinating efficiencies to provide economic value to the firm, therefore firms will
have higher cost structures if they do not adopt IT systems. However, firms arent able
to predict IT systems produce sustainable competitive advantages as most IT systems
are available to all competitors in competitive factor markets, so firms appear to have
three feasible paths only to IT-based competitive advantage including first, reinventing
IT advantages perpetually by continuous, leading-edge IT innovation, second, moving
first and developing isolating mechanisms for first-mover advantages; and/or third,
embedding IT systems in organizations so as to gain valuable resource
complementarity. According to this opinion many researchers suggested spending
more on innovation and technology in general and on the information technology
specially. Kim and Mahoney (2006) hypnotized that perpetual innovation may
hypothetically produce sustainable competitive advantages, but these advantages
confront ever-shortening IT development Cycles. Competitive advantage sources are
innovations, the resource based view argues that if resources are difficult to transfer, or
require prior investment to utilize (Dierickx and Cool, 1989; Kogut and Zander, 1992)
they will give sustainable competitive advantage (Reed and DeFillippi, 1990; Barney,
1991). These conditions are fulfilled by major technological innovations as they tend
to slowly spread (Gort and Klepper, 1982) and to be more rapidly adopted by high
technological capabilities firms (Dewar and Dutton, 1986). So shall organization chase
the new innovation in the field of information technology? Ping Wang, (2010) has
stated that among the numerous attempts to answer this question, there are two main
schools of thought. On the one hand, the economicrationalistic perspective is focused
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on organizational performance, which refers to the extent to which an organization

realizes its objectives, often measured by financial or economic terms. Scholars from
both economic and rationalistic perspective argue that organizations improve
performance by solving the problems efficiently through recognizing performance
problems, searching and adopting innovations (Cyert and March 1992). On the other
hand, the institutional perspective focuses on organizational legitimacy, referring to a
generalized perception or assumption that an organizations actions are desirable or
appropriate inside the organizations environment which is socially constructed
including norms, values, and beliefs (Suchman 1995). Institutional researchers contend
that organizations adopt innovations taken for granted as legitimate practices so as to
gain organizational legitimacy, regardless of the actual impact of the innovation on the
performance of particular organizations.
Also Ping Wang (2010) has described the IT as new, efficient, and at the forefront of
practice, and has found that organizations whose name were associated to IT fashions
in the press did not have higher performance, but better reputation and higher
executive compensation in the near term, however in the long term they could have
better performance, he continued that When managers confront a promising new IT, a
question they often ask is whether the technology will become the next big thing or if
it is just a passing fad. As this will lead to new innovation in the IT field that will be
adopted by the firm and resulting in transforming the IT and business practices. Like
For example, data warehouse, ERP (enterprise resource planning), and CRM
(customer relationship management) underwent wide swings in popularity, progressed
through hype cycles filled with inflated expectations, and spread across organizations
via passionate bandwagons of adoption.
Ping Wang (2010) argued the first phase, middle phase and the final phase of
innovation, as he mentioned that innovation could be early adopted by some
organizations, and their choices based upon their local calculation of the innovations
projected benefits in enhancing organizational performance which is the first level of
innovation. Once the innovation has been vastly adopted and institutionalized as a
legitimate practice, however, late adopters implement it simply to conform to
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institutional norms (last level). Although this performance-and-then-legitimacy driven

diffusion theory has received support in empirical studies (e.g., Fligstein 1985; Tolbert
and Zucker 1983), the theory is mysterious as to what happens in the middle: When an
innovation moves from its early diffusion toward institutionalization, does the pursuit
of performance or quest for legitimacy drive organizations to adopt the innovation?
In fact, the middle phase is often crucial to technological innovations. During this
phase, a new technology has to cross the chasm from the early adopters to the majority
of adopters (Moore 2002). It is also the period when various stakeholders build an
industrial infrastructure to institutionalize the innovation (Van de Ven 2005).
The fact that only some innovations succeed in achieving the objectives and others fail
begs a theoretical explanation for the important middle phase of diffusion. One might
propose that, in the middle phase, the most efficient innovations for enhancing
organizational performance come to be widely adopted and accepted as legitimate
practices. Despite its potential to synthesize the performance- and legitimacy-focused
perspectives, the proposition faces at least two challenges in its validation. First, the
innovation most efficient for one organization may not be so for another because each
organization is unique in some aspects. Second, the most efficient innovation is often
not the most widely adopted, nor institutionalized as a legitimate practice even in cases
where efficiency evaluation criteria are applicable across organizations. Many cases
show that innovations having suboptimal efficiency or even no obvious benefits come
to be widely accepted (Abrahamson 1991). Beyond the performance- and legitimacydriven adoption rationales, an innovations middle phase of diffusion often witnesses a
notable surge in popularity, reminiscent of fashion waves in aesthetics and
entertainment. The recently developed management fashion theory may offer a
promising explanation for the middle phase. When discourse converges on a technique
(e.g., TQMtotal quality management), a dramatic surge of media coverage and the
ensuing managerial attention and interest will create a management fashion: a
relatively transitory collective belief that, an administrative technique is new, efficient,
and at the forefront of management practices (Abrahamson 1996). This belief,
although often based on early adopters anecdotal success, leads to increasing pressure
on every organization to adopt the innovation as a result of organizational
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stakeholders expecting of managers to employ modern and efficient techniques to

manage their organizations.
The more organizations adopt the innovation, the stronger the collective belief. Then
even more organizations will adopt. In this way, management fashion and adoption
build upon each other in a self-reinforcing cycle. Consequently, certain innovations
may get managerial attention and organizational adoption out of all proportion to the
ultimate benefits flowing from their actual use (Fichman, 2004).
Apparently, management fashion theory has absorbed elements from both the
performance- and legitimacy-based theories of diffusion where performance gaps
motivate the search for innovations and adoptions of innovations in high fashion
convey legitimacy. In this way, management fashion theory complements other
theories for diffusion and provides a new explanation of an innovations mid-career.
Therefore, the management fashion should not sound unfamiliar if it comes to the
diffusion of IT innovations (Ping Wang, 2010). On the one hand to promote various IT
or IT-enabled innovations, a lot of researches produced voluminous discourse through
a host of outlets such as books, articles, workshops, and conferences. On the other
hand, to help organizations perform and compete, executives and IT managers are
characteristically on the lookout for the next big thing. Nowadays a lot of IT
innovations have emerged to the market and the be it ERP or Web 2.0, each of these
major innovations enjoys an instant fame and attracts tremendous managerial attention
and interest, which in turn generates a transitory collective belief that an information
technology is new, efficient, and at the forefront of practice, the IT innovation comes
into fashion as firms seeking new, efficient, and cutting-edge IT thus adopt the
innovation in fashion, a course of action often pejoratively depicted as jumping on the
bandwagon. However, the hype associated with every IT fashion will soon reach the
point where the expectation of the benefits the innovation will bring is inflated beyond
the capabilities of the innovation. Unfulfilled promise generates backlash, which
quickly drives the innovation out of fashion and sends it to the trough of
disillusionment (Linden and Fenn, 2003).

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Ping Wang (2010) has found that the two sides innovation coin are the IT practices and
the administrative, and has differentiated between them and has mentioned the IT
innovations uniqueness stimulates IT fashion research as a distinctive stream of IT
diffusion studies in contrast to administrative techniques such as employee
empowerment. Obviously, innovations of IT usually have real artifacts provided by
vendors and used by the adopters as (hardware and software components). Both
production assets of a vendor and work processes of an adopter are specifically applied
for a type of IT innovation (such as enterprise software), but are difficult to be applied
to other type. Therefore IT practitioners face high costs of switching, which might
make IT practice less liable to the fickleness of fashion, unlike management
consultants who can focus on their skill-sets in multiple types of administrative
innovations. Also, several fashionable IT innovations are institutionalized in contrast
to administrative innovations which are often abandoned when they go out of fashion
(Fichman 2004). But Ping Wang (2010) concluded that the distinguish between IT and
administrative innovation is just theoretical, but in practice, IT innovations often have
administrative components and administrative innovations often have IT components,
especially with the increasing Penetration of IT in administrative practices.
While it may be perfect to measure the innovation type whether it is IT wise or
administration wise, it is relatively direct in practice to identify innovations with
intensive IT components or intensive administrative components. The IT innovations
uniqueness of illustrated above needs IT fashion research to both articulate and
advance management fashion theory broadly, in addition to developing a fashion
theory specific to IT innovations (Baskerville and Myers 2009; Lee and Collar 2003;
Newell et al. 1998; Wang and Ramiller, 2009).
As synthesis for the above innovation section firms could be considered as legitimate
organization and as a result for that it can harvest not only social approval enjoyment,
but also gain access to resources, increasing their chances of survival and growth. In
contrast, organizations lacking legitimacy are likely to disappear (Ping Wang, 2010). It
considered a normal behavior as some researchers have noted that organizations seek
legitimacy by incorporating practices that match widely accepted cultural models
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embodying common beliefs. Adding to this the management fashion theorists claim
that an important common belief in an organizations environment is the belief that
certain innovations are efficient and at the forefront of practice, even though these
innovations have not yet been widely adopted. Organizations sensitive to such belief
will engage with current fashions and gain legitimacy. More recently, Staw and
Epstein (2000) argued that an organization can still improve its legitimacy, by pursuing
valued ends such as corporate reputation, once it has met the standards and
expectations specified by its external stakeholders.
So as a final conclusion in the innovation part and based on the previous researches we
found that the innovation leader or adopters or even followers who follow IT fashions
information ally or materially and they could bear the short term impact of fashion.
They gain in much more reputation, external legitimacy and their leaders are
compensated and even if the performance could be decreased in the short run but the
performance will be improved in the long run.

3.2.2.Follow and focus on the vulnerabilities and risks

Although a lot of researches have encouraged organizations to move towards the

innovation in the information technology field, some researches on the contrary
advised to wait to be sure from the technology then go, and have argued that if you can
spend less and cut the expenses and focus on the coexisted IT infrastructures and
systems vulnerability that would be better. Or concentrating on the firms resources to
be cooperative will give the firm competitive advantage rather than having bigger IT
equipments or technologies with small cooperation (Bruque, Moyano, Vargas and
Hernandez, 2003). Carr (2003) argued that IT is ubiquitous; however, we must focus
on its risks more than its potential strategic advantages. And he gave the electricity
example. No company builds its strategy on its electrical usage but even a brief lapse
in supply can be devastating., As when resources become essential to competition but

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not affecting the firms strategy, the risks it creates become more dangerous than the
benefits we can get or the advantages it provides.
Carr continued that now day, an IT inconveniences or disruption could result a
paralyzing to your company's ability in production process, services delivery, and
satisfying customers. He also advised that the greatest IT risk is overspending on the
IT and aggressively seeking an edge through chasing its new fashion regardless its
necessity. So he supports the tendency of managing the information technology costs
and risks with a frugal hand and pragmatic eye despite any renewed hype about its
strategic value. And he mentioned that taking care of what could go wrong isn't a
mistake, but it's a smart business trend recently.
Adding to his point of view that currently the tendency of outsourcing or sourcing the
IT is getting spreader, because of the arrival of the internet, which is providing a
perfect delivery channel for generic applications. So a lot of companies now can avoid
having IT department or they can have a very small front office IT by fulfilling their IT
requirements simply by purchasing fee-based "Web services" from third parties just
like they buy electric power or telecommunications services (Carr, 2003).
Carr (2003) has illustrated some example to build out his opining about the
commoditization of the information technology, so he said that some organizations
use IT to gain particular operating or marketing advantages to leapfrog the competition
in one process or activity like Myriad other companies have gained important
advantages through the innovative deployment of IT.
Carr (2003) has asked what companies should do? And he answered that When a
resource becomes essential to competition but inconsequential to strategy, the risks it
creates become more important than the advantages it provides and few companies
have done a thorough job of identifying and tempering their IT vulnerabilities as In the
long run, though, the greatest IT risk facing most companies is more prosaic than a
catastrophe.

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Basically, stronger cost management requires more to be strict in evaluating expected

returns from IT investments, more creativity in avoiding the extra costs and exploring
simpler and cheaper alternatives, and a greater openness to outsourcing and other
partnerships. But most companies can also harvest significant savings by simply
decreasing waste. Personal computers are a good example that has been illustrated by
Carr (2003). Every year, vast very known companies buy more than 100 million PCs,
to replace older PCs, although most of the workers who use PCs rely on only a few
simple applications word processing, spreadsheets, e-mail, and Web browsing. These
applications have been technologically mature for years; they require only a fraction of
the computing power provided by today's microprocessors. However, companies
continue to invest more in hardware and software upgrades. And companies have been
sloppy in their use of IT in addition to being passive in their purchasing. That's
particularly true with data storage, which has come to account for more than half of
many companies' IT expenditures. The bulk of what's being stored on corporate
networks has little to do with making products or serving customersit consists of
employees' saved e-mails and files, including video clips, terabytes of spam, and
MP3S. Computerworld estimates that as much as 70% of the storage capacity of a
typical Windows network is wasted, which is enormous unnecessary expense, there's
no excuse for waste and sloppiness as now IT has become the dominant capital
expense for almost businesses (Carr, 2003).

Carr (2003) has concluded that studies of corporate that insist on spending on the IT
showed that greater expenditures rarely translate into high financial results. In fad, the
opposite is usually true. So he argues that investments in IT are less and less likely to
deliver a competitive edge to an individual company. As however, that the technology's
potential for differentiating one company from the pack-its strategic potentialinexorably diminishes as it becomes accessible and affordable to all.

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3.2.3. IT management Rules

The establishment of strong alignment between information technology (IT) and

organizational objectives has consistently been considered as one of the key concerns
of information systems managers. In order to take advantage of IT opportunities and
capabilities, information technology (IT) management can be conceptualized as a
problem of aligning the relationship between the business and IT infrastructure domain
(Sambamurthy and Zmud, 1992).
For discussing resource management rule, a lot of researches argued that companies
should manage IT defensively-watching costs instead of seeking advantage through
technology, and avoiding risks as some managers may get worried from being careful
with IT expenses which in turn will damage their competitive positions (Carr, 2003).
Carr (2003) also in his review stated some numbers illustrating his point of view, In
2002, the consulting firm Alinean compared the IT expenditures and the financial
results of 7,500 large U.S. companies and discovered that the top performers tended to
be among the most tightfisted. The 25 companies that delivered the highest economic
returns, for example, spent on average just 0.8% of their revenues on IT, while the
typical company spent 3.7%. A recent study by Forrester Research showed, similarly,
that the most lavish spenders on IT rarely post the best results. Even Oracle's Larry
Ellison, one of the great technology salesmen, admitted in a recent interview that
"most companies spend too much on IT and get very little in return. The penalties for
overspending will only grow when the opportunities for IT-based advantage continue
to narrow, (Carr, 2003).
Carr advised that IT management should, become boring. The key to success, for the
vast majority of companies, is no longer to seek advantage aggressively but to manage
costs and risks wisely. You're already on the right course if, like many executives,
you've begun to take a more defensive posture toward IT, spending more carefully and
thinking more pragmatically.

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Stewart (2003) had third opinion that the required trend of information technology
management should be aligned with the business innovation, as the strategic impact of
IT investments comes from the cumulative effect of sustained initiatives to innovate
business practices in the near term. Therefore, not only the innovation in the IT will
give the required advantage, but the innovations in business practices require
extracting value from IT. So Companies will only destroy IT economic value by
mechanically inserting IT into their businesses without changing their practices for
exploiting the new capabilities.
Basically, most studies consider the overall effect of IT upon the firms corporate
strategy (Atkins, 1994; Baets, 1992; Lucas and Turner, 1987), and limited work has
been pointed to its influence on specific firm functions as logistics and on supply
chains in general (Lewis and Talalayevsky, 2004). Lucas and Turner (1987) discuss the
three levels that exist in the process of IT systems integration within the overall
strategy adopted by firms. In the first level of integration in independent IT systems,
assist the firm to implement its strategy by enhancing operational efficiency. These
systems are not directly linked to the strategy formulation process and most
information systems are in that category (Lucas and Turner, 1987). In the second level,
policy support IT systems such as activity-based costing systems that deal with
financial planning, are designed to aid the strategic planning process. In the third level,
IT is completely incorporated inside the companys strategy and a differential
competitive advantage is gained as its early users enjoyed a competitive advantage
more than rival companies (McKinnon, 1990).
In the first stage, logistics and IT strategies are developed in isolation to each other and
subsequently, independent and non-integrated logistics and IT operations are
formulated. Roche (1992) supported the above and noticed that IT starts to play a
greater part in the strategic expansion plan of the firm since the 1970s, a time where
the necessary IT systems were available. Hence, from the 1970s, retail firms start to
invest proportionally more on logistics and IT operations to support logistics planning
and to reduce the cost of distribution operations.

P a g e | 20

At the second stage, the logistics and IT strategies become closely associated leading
to the formulation of integrated distribution strategies and operations. The third stage
is that IT and logistics are transformed to completely integrated distribution coordination weapons and no more being cost reduction functions.
So to encourage the IT innovation alone to get legitimistic or social advantage is one
of the management ways which are concluded from several researches. But there is
another management way that advises to defensively innovate or just focus on the risk
that IT asset could generate. And there is the third one that uses the IT innovation only
to serve the business innovation.
As start to identify the relation between the IT-enabled resources and the sustainable
competitive advantages that we will illustrate briefly in the following section, we have
taken small example that has previously discussed explaining how IT can integrate
with one resource as retailing one and be strategic to the business.

P a g e | 21

4. Investing on IT-enabled resources and the sustainable

competitive advantage
4.1. Synergy might be the result from Emergent capabilities

Figure3, 4 (Nevo and Wade, 2010)

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Organizations try to anticipate the capabilities that could be the emergent of IT-enabled
resources and how those may contribute to the achievement of organizational goals
(Churchman 1971). They invest in an IT asset if it appears, for example, to
functionally complement an organizational resource. Therefore, the decision to invest
in an IT asset and combine it with an organizational resource is connected with
synergy that might emerge.
Nevo and Wade (2010) have defined the word synergy which derived from the Greek
word synergos that means to work together. (Corning, 1995), it is often used to label
relationships, including those between humans and their technologies that result in
positive outcomes. Synergistic outcomes which can be associated with IT-enabled
resources include increased efficiency, augmentation effects, improved scanning and
detection abilities and enablement of new processes where Mukhopadhyay (1992) and
his colleagues argued that the general domain knowledge of the expert with the
precision and speed of the technologys memory and analogical mapping may lead to a
powerful synergy.
In summary, Nevo and Wade (2010) illustrated that the relationship between an IT
asset and an organizational resource lead to a system called IT-enabled resource. The
interactions between these system components give rise to emergent capabilities which
are neither component possessed by their self nor that were modified due to the
relationship. The emergent capabilities presence suggests that an IT-enabled resource
is not the sum of its components thus it cannot be explained by aggregating the
capabilities of its constituent components. Instead, it can only be explained in totality
through considering the relationships among its components. When an IT-enabled
resource possesses positive emergent capabilities which make it more likely to
complete its tasks or reach its goals, the relationship among the components is
synergistic. Two important enablers to be considered in the context of IT assets and
organizational resources are first, as systems, IT-enabled resources should consist of
components which are compatible and second, the components of the IT-enabled
resource should be integrated to become a unified system.

P a g e | 23

Nevo and Wade (2010) gave examples where many organizations contain both
manufacturing department and sales department. These departments are interdependent
where the manufacturing department doesnt manufacture if the sales department
cannot sell and the sales department cannot sell unless the manufacturing department
manufactures. Therefore, the interaction between these departments is expected to be
synergistic. However, the performance criteria of these departments in many
organizations are incompatible and often lead to friction. Specifically, the criterion of
both cost minimization for the manufacturing department and of maximum revenue for
the sales department is in stark contradiction. The sales department sometimes wishes
to offer customers a wide variety of customizable products with varying and flexible
delivery schedules to reach its goal. On the other side, it is in the best interest of the
manufacturing department to strive for standardization, long-term production, and
limited product variety and delivery schedules. So, potential cross-departmental
synergies may not be realized because of incompatible performance criteria. Other
example, Maestro, which is a sales force productivity system (IT asset), was
implemented to aid the capabilities of Sun Life Canadas sales force (organizational
resource). Maestro was expected to generate three benefits: allowing sales reps to
service customer inquiries more rapidly, providing an opportunity to retrospect
within the existing client base, and improving sales reps time management. These
synergistic outcomes were associated with the relationship between a sales rep and
his/her Maestro-loaded laptop. More specifically, a sales rep was expected to use
Maestro to store and retrieve client data, plan, and set, manage goals and tailor
offerings to customers based on their stored data and present needs. However, the IT
asset was partially incompatible with its intended users: it was an American product
for the American marketplace leading to several modifications to be made before
synergies so as to be realized, specifically the IT asset had to be made bilingual and its
date and postal code formats had to change.

P a g e | 24

Also the third example that they explains the compatibility effects on any firms;
consider an organization in which the top management team (TMT), which considered
as organizational resource, is geographically dispersed. This property of the TMT
suggests that the capabilities of the BlackBerry (an IT asset) make it suitable for
maintaining communication and enabling decision-making, regardless of geographical
and temporal boundaries, as it may participate in a synergistic relationship with the
TMT. Thus, using a BlackBerry by TMT (IT-enabled resource) may be capable of
leading and managing the organization as if it were collocated (a synergistic outcome).
However, the synergy could be generated depending on the TMTs understanding of
the technologys use and functionalities and on the ability to incorporate this
technology to be compatible with business processes.

4.2. From synergistic IT-enabled resources to the sustainable

competitive advantage

Here in the literature we have been interested in studying the relationships between IT
assets and the organizational resources and how the integration affect each
departmental strategies and lead to serve the organizational business strategies or the
firms corporate strategies. We define this integration such as Nevo and Wade (2010)
defined it as the IT-enabled resources which considered also the emergent capabilities
and resources resulted from this interaction. In resource-based theory, one of the
challenges to the earlier optimism concerning an IT systems potential for creating
sustainable competitive advantage is developed (Barney, 1991; Mahoney and Pandian,
1992; Mata, Fuerst, and Barney, 1995).
Since when a lot of researches have focused on advantages derived from industry and
competitive positioning, the resource-based approach has focused on competitive
advantages stemming from firm specific, intangible resources. According to resourcebased theory, heterogeneity should be coexist inside the firms among firms resources
and organizational capabilities on which they base their strategies, and the unique
P a g e | 25

resources should be protected through isolating mechanisms as resource

complementarities and causal ambiguity, unlike products features and strategic
positions that could be easy for the competitors to imitate giving rise to sustainable
competitive advantage (Kim and Mahoney, 2006). Also he added that IT systems per
se has produced a perspective known as the strategic necessity for the IT and do not
attain sustainable competitive advantages. And he mentioned 2 propositions about IT
Economic value, first by increasing coordinating efficiencies, and thus firms that do
not adopt IT systems will have higher cost structures and secondly because of the wide
availability of the IT in the competitive market as a resource that can be replicated or
imitated. According to Kim and Mahoney (2006) opinion about the strategic view of
the IT-based resources, to attain competitive advantages through the usage of ITenabled resources firms have three paths.
First path is for getting perpetual advantages to be leader in IT innovation by
continuing IT innovation process. Second be the first mover and develop isolation
mechanisms. And finally produce valuable resource complementarities by embedding
IT systems in organizations (Bharadwaj, 2000; Powell and Dent-Micallef, 1997;
Santhanam and Hartono, 2003). He continued explaining the three paths, that
perpetual innovation may hypothetically produce sustainable competitive advantages,
but these advantages confront ever-shortening IT development cycles. Efforts to
achieve IT advantages through first mover action that seem more promising for any
firm, accurately those systems owned by a firm to utilize its specific strengths or
opportunities. However, as the case studies that Westland and Clark (1999) illustrated
for example, some IT systems that have been built and deployed within some firms
often become liabilities over time and generally provide temporary advantages to the
firm. But in a lot of organizations IT systems that build linkages and interdependencies
among the organizations resources and the relation between these resources and the
outside world can become difficult for competitors to duplicate or imitate as a whole
(Kim and Mahoney, 2006; Nevo and Wade, 2010). Furthermore, they mentioned that
If the adopted inter-organizational IT system is incompatible with alternative
contracting parties, it is even more difficult to duplicate and the competitive advantage
achieved from the IT system could be sustained. Thus, for achieving an IT system
P a g e | 26

advantage, resource-based theory focuses on resource complementarities as the most

likely path for that (Keen, 1993).
As a sum for the resource based theory including the IT-enabled resources, Kim and
Mahoney (2006) and its resource-based origins provide a solid theoretical foundation
for investigating the conditions under which an IT system may produce sustainable
competitive advantage. In Particular, the resource-based theory aims to a cospecialization perspective (Teece, 1986) that emphasizes the ability of producing a
sustainable competitive advantage from mixing or combining the firms IT systems
with its specific resources which are complementary assets. The logistics strategy is
the development of actions based on the firms logistics capabilities (Fabbe-Costes and
Colin, 1999), while the IT strategy aims to create a competitive advantage differential
through driving firms costs down and giving firms new ways to outperform rivals
(Porter and Millar, 1995), and here lives the IT rules or benefits for any company.
Nevo and Wade (2010) gave set of examples that show how IT in integration with
some organizations functional departments or resources can generate strong
enhancement for the organization and may give it competitive advantages over their
competitors. Example, the usage of Videoconferencing technology in multinational
company which has a globally dispersed team, that combination pointed as IT-enabled
resource, may not demonstrate its improved ability to communicate more effectively,
despite having this property, until it is required to make a team-based decision. Also
another example they mentioned about possessing an enhanced complaint traceability
system that has the ability to quickly and accurately trace customer complaints, even
when it does not engage an angry customers, so the number of complaints processed in
a workday can be increased massively as a result from IT-enabled complaint center.
Kim and Mahoney (2006) have mentioned the effect and the importance of the IT on
one of the functional unit in a firm, when IT changed the internal process of the sales
department; the following emergent capabilities were predictable based on the
anticipated interactions between the sales representatives and the client management
systems. Some of the emergent capabilities are servicing and reacting to customer
P a g e | 27

requirements faster, considering the client base, improved time management, and
enhancing the internal process.
However, in some cases, emergent capabilities are not completely predictable.
For example, Klein and Sasser (1994) described a case where a customer analysis and
retention system was built and developed within a customer service department.
Unlike the Huff and McNaughton case, the relationship between the IT asset and the
organizational resource had several unexpected outcomes. That linkage had emerged
increasing in the retention rates among complaining customers, reducing monetary
compensation, and increasing satisfaction among customer service employees.
Therefore, in this literature emergent capabilities are considered positive or beneficial
ones if they have the ability to help an IT-enabled resource to achieve organizational
tasks or goals.
Other researchers have illustrated the benefits of the Information technology aligned
with firms functional strategies by exposing some IT systems usage, like IT systems
can provide a valuable information about products specification and prices through ecatalog and the transactions history through Data warehousing framework which also
provide customer, sales, and marketing history, forecasts, and promotion for customer
relationship management. And through the value chain inside the firm, suppliers and
supply chain, contractors, product line and lead times, quality, performance, inventory,
and scheduling for supply chain management. Production process, which Includes
capacities, commitments, and product plan for virtual corporations, could be merged
with professional IT systems. Also IT systems could provide transportation carriers,
lead times, and costs for just-in-time (JIT) delivery management (Lee, 2003: 82; Nevo
and Wade, 2010; Kim and Mahoney, 2006; Rice and Gattiker, 2001).
And beside all previously mentioned benefits for IT with the firms functional
strategies, IT systems could help a lot in the firms Business strategies through
providing analytical data about your competitors by benchmarking the competitive
product for your market share, the market promotions, offerings, and direct
competitors (Lee, 2003).
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Thus, if an IT system alone is not enough and should be supported with

complementary resources for specialized IT system to achieve sustainable competitive
advantages; in particular the human resources, with an increased use of IT
systems(Kim and Mahoney, 2006).
Wheelen, Thomas and Hunger (2008) have referenced a lot of researches in
mentioning the importance of IT for both the functional and business strategies for any
firm by referring to firms which are increasingly using information technology strategy
to provide business units with competitive advantage. And they gave example, FedEx
sales increased highly when first provided its customers with Power Ship computer
software to store addresses, print shipping labels, and track package location. USP
soon followed with its own Maxi Ships software. However FedEx continued to push
for further advantage over USP through viewing its information system as a distinctive
competency using its website to enable customers to track their packages and showing
how customers can track the progress of their shipments in advertisements, but soon
USP provided the same service. Corporations worldwide continue to spend over 2$
trillion on information technology annually although it can be argued that information
technology has now become so pervasive that it no longer offers companies a
competitive advantage.
Wheelen, Thomas and Hunger (2008) also exposed new importance for IT
Multinational corporations find that having a sophisticated intranet allows employees
to practice follow-the-sun management, in which project team members living in
different countries can collaborate hence; night shifts are no longer needed. Instant
translation software creation enables workers to have online communication with
different language co-workers in other country. Fore example, Mattel has decreased
the time it takes to develop new toys by 10% by enabling designers and licensees in
other countries to collaborate. IBM uses its intranet to allow its employees to
collaborate and improve their skills leading to training and travel expenses reduction.

P a g e | 29

And they continued mentioning that a lot of companies use information technology
(complicated extranet) to form closer relationships with both their customers and
suppliers through the overall value chain. General Electrics Trading Network allows
suppliers to electronically download requests for proposals, view diagrams of parts
specifications, and communicate with purchasing manager leading to decreasing
processing time by one-third.
In addition, Kim and Mahoney (2006) have added an assertion that the firm is able to
access alternative cooperative parties with a superior production system, thereby
reducing its production costs. A lot of researches have argued that because IT systems
lead to an overall decreasing in coordination costs in terms of searching and
communicating with transacting parties. So, due to more applicability of a general IT
system along with positive network that links firms with the outside world (supplies
and customers), we expect that an accelerated decrease of external coordination costs
leads to high cooperative results with the minimum effort. Nevo and Wade (2010) have
added that the compatibility must also exist between an IT asset and the organizational
resource with which it is combined.

Kim and Mahoney, (2006) have reached conclusion that the sustainable competitive
advantage that is based on the IT-enabled resources depends on utilizing relationships
among complementary resources to create a co-specialized firm-specific IT system as
a dynamic capability of the firm. Combining with that the Nevo and Wade (2010)
synergy enablers which are the integration and compatibility among the firm
resources, using some useful new technologies with some business innovation (Wang,
2010), but avoiding the Carr (2003) fears about the madness in chasing the hottest
fashion in IT technology no matter it could be helpful or integrate with other resources.
All these conclusions however they seem conflicting with each others, but with a deep
look they could help top management to explore or exploit IT to generate sustainable
competitive advantages linked with other resources.

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5. Conclusion
As a conclusion to this study answering the question about the investing on the IT to
be integrated with the other resources and their effect on achieving the management
objectives and creating unique IT-enabled resources which lead the organization to
capture any new opportunities and attain competitive advantage over their competitors
which dont invest more on this integration. So IT systems per se do not attain
sustainable competitive advantages, but the synergistic relationship between an IT
asset and an organizational resource can produce a rare, valuable and inimitable ITenabled resource which could be the sustainable competitive advantage for any firm, if
a lot of effort has been conducted to assure the integration and the compatibility
among the firms resources and its IT department. But what's important for any
organization is to determine what necessary commodity to invest on and the
unnecessary investments to cut the unwanted costs and focus more on the
vulnerabilities to increase the organization performance.

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