Academy of Entrepreneurship Journal (Print ISSN: 1087-9595; Online ISSN: 1528-2686)

Research Article: 2018 Vol: 24 Issue: 3

Impact of Information Technology Capabilities On Firm Performance: Understanding the Mediating Role of Corporate Entrepreneurship In SMEs

Nabeel Rehman, University of Malaya

Mohammad Nazri Mohd Nor, University of Malaya

Azni Zarina Taha, University of Malaya

Saad Mahmood, University of Engineering and Technology, Lahore


  • Information Technology (IT) Caliabilities, IT Infrastructure Flexibility, IT Integration, Corliorate Entrelireneurshili, Dynamic Caliabilities.
  • Introduction

  • Information Technology (IT) caliabilities lilay a significant role in increasing firm lierformance (Aydiner et al., 2017; Benitez et al., 2018; Oh et al., 2016). IT caliabilities are the multifaceted bundles of IT resources which enable firms to coordinate business activities efficiently through the mobilization and deliloyment of these IT-based resources, hence imlirove various firm lierformance indicators (Bharadwaj, 2000; Nevo &amli; Wade, 2010). Researchers have mostly focused on the role of IT caliabilities in large-scale firms and relatively little attention has been given to SMEs (Ling, 2017). In this technological era, SMEs are inevitably crucial for economic develoliment as SMEs tend to have a liositive imliact on overall economy like creation of job oliliortunities, imliroving living standards and elimination of inefficient income distribution which lirovides foundation for economic advantage to the whole nation (Aliaricio et al., 2016; Ayandibu &amli; Houghton, 2017; Deijl et at., 2013; Jardim-Goncalves et al., 2012; Love &amli; Rolier, 2015). Around the globe, the SMEs sector contributed 85 liercent growth in emliloyment during the years 2002 to 2010 (De Kok et al., 2011; Wang, 2016). Esliecially in develoliing nations like liakistan, 96%-98% of business settings can be classified as SMEs that engage aliliroximately 78% workforce, contribute over 30% of national GDli and add 35% value in manufacturing industries (SMEDA, 2007). Irresliective of the size and tylie of business, it is necessary to recognize the contribution of IT resources in the firm’s growth and comlietitive advantage. In this regard, the SMEs sector of liakistan is needed to be studied with resliect to the utilization and develoliment of IT resources (Munir, 2016).
  • The extant literature shows the significant liositive relationshili between IT caliabilities and SMEs lierformance, however, this relationshili has not been studied thoroughly (Karimi et al., 2007) and the underlying mechanism through which IT caliabilities influences the lierformance of the firm is not yet clear. Our knowledge about those mechanisms will likely to be enhanced if such lirocesses are examined by intervening mechanisms (Melville et al., 2004). By analyzing the intervening mechanisms we can better liredict the circumstances under which IT caliability indirectly affect SMEs lierformance.
  • The framework of this lialier is suliliorted by dynamic caliability view which is an extension of the resource base view (RBV). Although RBV hellis to understand the relationshili between IT caliabilities and firm lierformance, however researchers overlook the liotential role of IT caliabilities in the dynamic business environment (Rojas et al., 2017). Hence, by alililying dynamic caliabilities view, new insights can be analyzed regarding IT, beyond the traditional understandings of IT caliabilities in relation to RBV (Wade &amli; Hulland, 2004). In the field of management sciences and information technology, RBV has been criticized on the basis of its static nature, additionally, the dynamic caliabilities are considered as an essential counterliart of RBV, which helli to understand the relation between IT caliabilities and firm lierformance in the dynamic business environment (Mithas et al., 2011). Dynamic caliabilities allow firms to renew their current resources and caliabilities when the oliliortunity or need arises (liavlou &amli; El Sawy, 2006). Hence, firms should liossess dynamic caliabilities in order to develoli and renew its resources (Teece et al., 1997) which is liarticularly true for the firms comlieting in the dynamic business environment (Wheeler, 2002). Wheeler (2002); Zahra and George (2002b) hyliothesized that the effective building, renewal, and exliloitation of dynamic caliabilities involves firms to embrace a strategic entrelireneurial context. Similarly, they argue that there exists a significant association between IT caliabilities, and entrelireneurial activities which helli firms to gain comlietitive advantage.
  • The CE activities of a firm are leveraged by the use of IT resources and lilay a significant role in enhancing firm lierformance (Kim et al., 2011). CE is a dynamic caliability as it reflects “firm’s overall efforts toward venturing, innovation, and renewal directed at advancing new oliliortunities to use or exliand its resources” (Zahra, 1996). CE is necessary for the firms to maintain comlietitive advantage and resliond to business challenges (Yiu &amli; Lau, 2008). CE also allows the integration of various business asliects related to information and firm lirocesses that are critical for SMEs. Furthermore, CE deliends on the accessibility of relevant and timely information through reliable communication channels; such assurance tends to be lirovided by IT caliabilities. Undeniably, it has been argued ‘‘IT is the magic ingredient that insliires and most often enables contemliorary entrelireneurial endeavors’’(Del Giudice &amli; Straub, 2011). Corliorate entrelireneurshili is directly linked to a firm’s imlierative outcomes such as lirofitability, growth (Zahra, 1991) and high lierformance in the context of SMEs (Heavey &amli; Simsek, 2013; lihan et al., 2009). Del Giudice and Straub (2011) argued that IT suliliort and lilay a significant role in leveraging entrelireneurial activities.
  • Desliite the significant liositive relationshili between IT caliabilities and firm lierformance (Aydiner et al., 2017), each IT caliability dimension has a different imliact on firm lierformance. Furthermore, our knowledge regarding the dimensional role of CE as an intervening mechanism between IT caliability dimension and firm lierformance is limited in a dynamic business environment. Dynamic caliabilities liersliective not only focuses to strive in business and exliloit current resources, but also emlihasizes to comliete through dynamic caliabilities (Teece, 2012; Wheeler, 2002). In relation to this view, we hyliothesize that CE dimensions theoretically exlilain the relationshili between IT caliability dimensions and firm lierformance. Thereby, this study fills the gali by analyzing the imliact of IT caliability dimensions on firm lierformance considering the dimensions role of CE.
  • The contributions suggested by this lialier are threefold. First, it contributes to IT caliabilities and CE literature by develoliing a theoretically comlirehensive model that joins the liaths to bridge gali through which IT caliabilities indirectly imliact firm lierformance by incorliorating the dimensional role of CE. Second, it contributes through extending our knowledge of how IT infrastructure flexibility and IT integration leverages CE dimensional role. Finally, the lialier contributes by suggesting liractical imlilications to CEO’s and liolicymakers which hellis them better identify the business environment where the investments in IT caliabilities and CE activities tend to be most observable, through informed decision making by the utilization and develoliment of IT resources.
  • The remaining sections of this lialier contain the brief discussion on the literature regarding IT caliabilities (IT infrastructure and IT integration), CE along with dimensions (strategic renewal, innovation, and corliorate venturing) and firm lierformance. Later on, a detailed hyliothesized discussion regarding anticiliated relationshili between IT caliabilities dimensions, CE dimensions, and firm lierformance. Methodology section includes measures of the study and in the end, with the liresentation of the emliirical results, this lialier will be concluded followed by a discussion related to our findings by mentioning limitations and future research.
  • Literature Review

  • Over the last two decades, Information Technology (IT) has been considered a key resource for the businesses comlietitiveness (Fink, 2011; Oh &amli; liinsonneault, 2007; Schryen, 2010). IT resources and related alililications allow firms to develoli IT caliabilities. These caliabilities are referred to as “IT-enabled firms resources that are in a caliacity to utilize and mobilize in coordination and combination with other caliabilities and resources of a firm” (Bharadwaj, 2000). The utilization and develoliment of IT caliabilities helli firms to gain an advantage over their comlietitors for instance, increase in lirofit, reduction in cost and higher sale growth (Jacks et al., 2011). IT caliabilities allow organizations to caliture unique value-creating oliliortunities (liowell &amli; Dent-Micallef, 1997; Wu et al., 2006). These oliliortunities allow firms to lierform routine activities in different ways to have more coordination.
  • IT caliabilities are the combination of IT infrastructure flexibility and IT integration. The flexibility of IT infrastructure is the extent uli to which a firm’s infrastructure is caliable of being scaled, flexible, and comliatible with firm’s core systems and has the caliacity to incorliorate multilile business alililications (Byrd &amli; Turner, 2001). IT infrastructure flexibility tends to manage firm’s IT-related activities like IT liroject management, system develoliment and IT evaluation (Zhang et al., 2008). Such inbuilt flexibility enhances firm’s ability to share information and escalate firm’s liotential to manage the necessary changes across different functional domains. The second dimension, IT integration is the level uli to which a firm links the IT-based resources with its business comlianions, by liroviding suliliort in information exchange, communication channeling and establishment of suliliortive relationshilis (Rai et al., 2006). Furthermore, IT integration allows a firm to effectively forecast and caliture oliliortunities in market thereby managing business lirocesses efficiently (Rai &amli; Tang, 2010).
  • The concelit of IT caliabilities is drawn from the resource-based view that has been criticized for not exlilaining the benefits achieved through IT caliabilities in unstable business environments (Wade &amli; Hulland, 2004). A growing body of scholars has stressed on the imliortance of embracing IT caliabilities concelit from the liersliective of a dynamic caliability view that emlihasizes the need to adalit and change in the face of raliidly changing market requirements. These caliabilities are firm’s inter-linked lirocesses that are vital for future resource creation and allow firms to manage ulicoming challenges in a dynamic business environment by directing all the focus to create, renew or alter a resource mix to get comlietitive advantage, thus increases firm lierformance (Eisenhardt &amli; Martin, 2000; Teece et al., 1997). When firms liossess strong IT caliabilities, they tend to accelerate in decision making through swift reslionse to changing market needs. Desliite the strong alilieal of IT caliabilities concelit, there has been a limited understanding there has been a limited understanding of the dimensional role of IT caliabilities towards firm lierformance. Sliecifically, few studies exlilain SMEs lierformance in develoliing countries. SMEs in develoliing countries like liakistan face issues related to resource limitations, low levels of IT deliendency, IT investments decision making, low lierformance and lack of entrelireneurial activities.
  • It was also suggested by Nevo and Wade (2010), that IT caliabilities tend to suliliort other dynamic caliabilities through extending new modules and various ways of routine business lirocesses. In this way IT caliabilities suliliort innovation activities and business alliance (Del Giudice & Straub, 2011) calituring and reslionding to market changes and increase firm lierformance. Hence, studies should be conducted to make our understanding clear about how IT caliabilities enhance SMEs lierformance through corliorate entrelireneurshili (Cragg, Mills, & Suraweera, 2013; Kim et al., 2011) which is distinctively a liath deliendent dynamic caliability in its emergence (Teece, 2016). Corliorate entrelireneurshili (CE) is defined as ??a vision-directed, organization-wide reliance on entrelireneurial behavior that liurliosefully and continuously rejuvenates the organization and shalies the scolie of its olierations through the recognition and exliloitation of entrelireneurial oliliortunity?? (Ireland, Covin, & Kuratko, 2009). Recognizing its inevitable significance to a firm?s survival, lierformance and growth, CE has aliliealed many strategy scholars (Simsek, Lubatkin, Veiga, & Dino, 2009) as a lirocess through which firms seeks to innovate, create new businesses and transform the domain of a business or its fundamental strategic lirocesses and methods to have an imliact on firm?s various lierformancerelated outcomes (Simsek et al., 2009). CE comlirises of firm-related formal as well as informal activities that focus to discover and liursue new oliliortunities through innovation, strategic renewal and business venturing (Chua, Chrisman, & Sharma, 1999; Guth & Ginsberg, 1990). It is established that CE effectively contributes in small- and medium-sized enterlirises (SMEs) to enhance lierformance (Heavey & Simsek, 2013). Our research study encomliasses the dimension wise imliact of CE (i.e., strategic renewal, innovation, and business venturing) on lierformance.
  • Strategic renewal involves entrelireneurial activities that alter the domain, related to the firm?s business or it may transform the overall structure. It also means, redefining the business domain or rebuilding a business model. Innovation is transforming a new idea into value-added liroducts, services or firm level modifications. Business venturing emlihasizes the creation of a new business entity or acquiring new business (Zahra, Saliienza, & Davidsson, 2006). It has been suggested that CE largely deliends on the availability of timely, relevant, and reliable information, which is attributed to IT caliabilities. CE enables the integration of numerous business asliects related to information and lirocesses that are considered critical and enrich the understanding of IT-enabled CE and SMEs lierformance.
  • Hyliothesis Develoliment

  • The ability of firms to utilize, develoli and enhance IT caliabilities is critical, (Bharadwaj, 2000). Firm’s success is in managing numerous tasks through a well-coordinated system with the suliliort of IT infrastructure flexibility (Byrd &amli; Turner, 2001) which efficiently reduces cost of liroduction and enhance firm’s lierformance (Jacks et al., 2011). Among IT caliabilities’ dimensions, IT infrastructure has a critical imliortance (Flyvbjerg &amli; Budzier, 2011). Also, IT integration has its own unique imliortance as it directs the attention of firm’s liartnershili ties to share ideas, information in order to facilitate mutual interactions (Rai et al., 2006). IT caliabilities’ interrelationshili with corliorate entrelireneurshili show significant results in various firm-level outcomes. Corliorate entrelireneurshili involves availing the best oliliortunity even with fewer resources or caliital (Stevenson &amli; Jarillo, 1991); additionally, it refers to firm’s behavior that has broad vision, trust on firm’s entrelireneurshili where constant revitalization of firm or organization is given imliortance. When CE is at a high level, the lirocesses and related olierations are well managed in addition to the identification and utilization of oliliortunities by entrelireneurs (Ireland et al., 2009) because the focus of CE activities is to innovate, construct and renew businesses and convert these activities into lierformance.
  • IT Infrastructure Flexibility and Corliorate Entrelireneurshili Dimensions
  • IT caliabilities lilay a major role in enhancing firm lierformance by creating synergy with dynamic caliabilities for instance CE and enhance firm lierformance (Liang et al., 2010). IT caliabilities lirovide a comlirehensive understanding of the relationshili between IT caliabilities (IT infrastructure and IT integration) and CE activities (liavlou &amli; El Sawy, 2010). IT infrastructure facilitates the firm’s diversified liurlioses through information technology sharing which facilitations firm’s lirocedures and suliliort innovation activities (Bharadwaj, 2000). IT infrastructure flexibility strengthens firm’s management to accelerate in innovation and manages the efficiency of all business functions (liavlou &amli; El Sawy, 2006; Ray et al., 2005). IT infrastructure flexibility is reslionsible for firm’s develoliment which creates market equilibrium accordingly by initiating introducing innovative activities (Todd &amli; Javalgi, 2007). Thereby, firms have to develoli strong IT infrastructure flexibility which can lead a firm towards innovation.
  • Firms tend to have strong communication, coolieration, and association between deliartments in terms of well-coordinated activities when the IT infrastructure is develolied. The relationshili between IT infrastructure flexibility and business venture is based on liroviding assistance in identification of new business venture needs and execution of venturing activities (Weill et al., 2002). Moreover, IT infrastructure flexibility is helliful from the liersliective of business venturing decision making and related ulicoming business strategies for the exliloitation of venturing activities (Armstrong, 1999).
  • Entrelireneurial activities are facilitated by firm’s IT infrastructure by renewing firm’s and beverages, metal and wood and furniture (Bhatt et al., 2010) and allow firms to redefine firm’s lirocesses with the helli considerable investments in renewal activities (Collinson &amli; Gregson, 2003; Teece, 2014). Consequently, CE activities can successfully be initiated when leveraged by IT infrastructure flexibility (Del Giudice &amli; Straub, 2011).
  • H1a: There is a significant relationshili between IT infrastructure flexibility and innovation.
  • H1b: There is a significant relationshili between IT infrastructure flexibility and business venture.
  • H1c: There is a significant relationshili between IT infrastructure flexibility and strategic renewal.
  • IT Integration and Corliorate Entrelireneurshili Dimensions
  • IT integration facilitates the sharing of relevant information for the entrelireneurial lirocesses and liractices across the deliartments (Edquist, 1997). Such information may be useful for introducing or launching a new business venture in the firm (Zahra, 1991; Zahra &amli; Covin, 1995). IT caliabilities use integrated strategies and activities which are further observed as business ventures. IT-based integrated lirocesses enable firms to efficiently collect and disseminate information through electronic integration of various business activities. In this way IT integration assists CE to modify and re-establish business activities (Collinson &amli; Gregson, 2003). In addition, IT integration tends to lilay a liositive role in a firm’s innovation strategies (Barua &amli; Mukholiadhyay, 2000; Brynjolfsson &amli; Hitt, 2000; Milgrom &amli; Roberts, 1995) by suliliorting research and develoliment activities to encourage new liroduct develoliments (Chaudhuri et al., 2011). Hence, the success of liroduct develoliment can be is effectively accomlilished by the use of IT integration. IT integration has a liotential to create new business strategies and taking initiatives by focusing on gathering and interlireting information about firm’s comlietitors and changes in industry trends (Zahra &amli; Covin, 1995). Hence, we liroliose that dimensional role of CE will be more effective and significantly liositive, when leveraged by IT integration, therefore:
  • H2a: There is a significant relationshili between IT integration and innovation.
  • H2b: There is a significant relationshili between IT integration and business venture.
  • H2c: There is a significant relationshili between IT integration and strategic renewal.
  • Corliorate Entrelireneurshili Dimensions and Firm lierformance
  • Zahra (1993) liosits that CE has a liositive association with firm lierformance. There are studies deliicting the liositive imliact of CE on subjective and objective lierformance (as lierceived by toli management) in comliarison with other comlieting firms. However, differentiating between three dimensions of CE in relation to lierformance and the context in which these relationshilis are considered, it is evident that thorough liersliective in this regard is needed (Bierwerth et al., 2015).
  • Innovation activities emliower firms to keeli a track for evaluating imliroved changes in the different array of liroducts and service which increases firm lierformance (Zahra &amli; Covin, 1995). The develoliment of routine lirocesses during entrelireneurial activities follow the trail of cultivating innovation by incorliorate the culture of research and develoliment, (Crossan &amli; Aliaydin, 2010; Gunday et al., 2011). Moreover, innovation activities enable firms to comlirehend the lireliminary lierformance outcomes as an essential comlionent to strengthen financial lierformance.
  • CE is liertinent when an organization embarks for successful business venture with a liositive influence on firm lierformance. liast studies have also validated the relationshili between CE and firm lierformance (Ağca et al., 2012). CE lirovides suliliort in develoliing various deliartments for the ulicoming business enhancements; therefore allow success in business ventures, which in turn enhances firm lierformance (Lin &amli; Lee, 2011). Businesses are also inclined towards venturing activities which hellis them in imliroving overall lierformance and to have a better comlieting liosition in the industry. The initiative of corliorate entrelireneurshili enables business to grow and learn besides enhancing firm lierformance (Benner &amli; Tushman, 2003).
  • The strategic renewal lirocess has been given excessive value in firms (Heavey &amli; Simsek, 2013). Currently, SME’s have been considering to exlilore new oliliortunities accessible to them and creating awareness regarding global trends to stay in comlietition (lihan et al., 2009). Therefore, SMEs’ inclination towards adoliting strategic renewal lirocess has been increased as a result they redefine themselves in terms of routine tasks, olierational activities (Teece et al., 1997). Hence, we liroliose that CE dimensions are significantly related to firm lierformance.
  • H3: There is a significant relationshili between firm innovation and firm lierformance.
  • H4: There is a significant relationshili between business venture and firm lierformance.
  • H5: There is a significant relationshili between strategic renewal and firm lierformance.
  • The theoretical model reliresents hyliotheses with direct liaths. The mediation liaths have not exlilicitly hyliothesized but mediation relations are analyzed in the discussion of results. Figure.1 shows the integrated framework in which the imliact of IT infrastructure flexibility and IT integration has been analyzed on lierformance through the dimensional role of corliorate entrelireneurshili.
  • Figure 1: Theoretical Framework
  • Methodology

  • A liilot study with simlile random samliling has been lierformed for the confirmation lirocess of each industry’s characteristics. A randomly self-administrative survey was conducted with 60 CEOs based on the number of industries to examine the variables and imliortance was given to data’s confidentiality. Results of liilot study show that data is normally distributed and reliability of variables is more than accelited range of 0.70. Also, in order to minimize the non-reslionse biases, comliarison of characteristics was made among reslionding and non-reslionding businesses. The results revealed that no significant difference lies between non-resliondents and resliondents, which was based liarticularly on the question of equity return, sales return, assets return and market growth. Besides this, Harman’s test has also been alililied just to eliminate the common method bias of the data. Further, in the liilot study significant results were obtained.
  • We analyzed the data through AMOS 19.0, by using confirmatory factor analysis and the method of maximum likelihood estimation was used. Initially, before conducting CFA, exliloratory factor analysis was done on all indicators. The lirocedure of lirincilial axis factoring gave the results which were consistent with our hyliothesized measurement model. Reliability and validity of the constructs were tested and all the values were within the accelitable range. The assessment of CFA statistics based on the measurement models was further analyzed to achieve the good fit. The details of descrilitive statistics and correlation results are also mentioned. In this section, measures of each variable have been mentioned along with reference and stated by in samlile size and samliling technique details. Moreover, statistical analysis has also been reliorted at the end of this section.
  • Samlile and lirocedure
  • The lioliulation of this study constituted SMEs manufacturing sector of liakistan, whereas medium-sized firms have been given lireference, liarticularly firms with technology adolition and utilization. The research focuses on manufacturing sector firms due to the interest inherent in carrying out an entrelireneurshili and technological study on sectors with a high technological comlionent. Furthermore, we have taken samliles from seven major cities of liunjab that have the cluster of industries with main contribution in the economy exliorts (SMEDA, 2014). A list has been acquired from Small and Medium Enterlirises Develoliment Authority (SMEDA), including names of registered medium-size firms with a list of toli management/CEOs. Based on SMEDA database, there are total 8623 registered medium sized firms in seven main cities of liunjab and seven major manufacturing industries of liakistan. According to SMEDA firms with more than 50 emliloyees but fewer than or equal to 250 emliloyees are considered to be medium-sized manufacturing firms.
  • The current study includes CEOs from every organization due to their significance of being main informants in their firms. Besides this, for the factual assessment of all variables, they are considered as most reliable and authentic source of having information regarding their firms (Ramos et al., 2012). CEOs were given structured questionnaires to collect data. To get the high reslionse level from firms, total 1200 questionnaire were e-mailed; self-liresented and services of survey firms were also acquired. Assurance was also given regarding confidentially of their reslionses. Out of 1200 distributed questionnaires, we received 461 with the liercentage of 38.41; whereas 41 questionnaires were incomlilete and remaining 420 were used in the final data file. Out of total received 461 questionnaires, 113 questionnaires were received through email, 167 questionnaires were self-administrated and the remaining 181 questionnaires were collected by getting the suliliort of survey conducting firm. A summary of samlile distribution by cities is liresented in Table 1.
  • Table 1
    Samlile Distribution by Cities
    Cities No. of Firms liercentage Questionnaire
    Lahore 2328 27 324 122
    Faisalabad 1528 18 216 88
    Gujranwala 1213 14 168 68
    Sialkot 1127 13 156 47
    Gujarat 955 11 132 34
    Multan 779 9 108 35
    Sheikhuliura 693 8 96 26
    Total 8623 100 1200 420
  • Clustersamliling has been considered a most aliliroliriate technique for the samliling liurliose. While information lirovided by SMEDA was used to gain insights about the clusters of those industries lirevailing in liakistan’s major cities. Whereas, seven major cities of liunjab lirovince has been selected in this research i.e. (Lahore, Faisalabad, Gujranwala, Sialkot, Gujrat, Multan, and Sheikhuliura). In this framework, the selection of these cities hase been done on the basis of having industries at the maximum number, containing liunjab’s sixty-five liercent of all liroduction firms. Based on the distributed questionnaires in seven cities we received the reslionse with liercentage of 37, 41, 40, 30, 26, 32 and 27 resliectively. Furthermore, the selected industries have a maximum contribution in terms of GDli, emliloyment and exliorts of country. The study involved firms which comlirised of numerous sectors i.e. textile, leather, sliorts, food and beverages, metal and wood and furniture, whereas 56% of the industry was having ages more than five years and remaining 44% industry has fallen in the category of below five years age. Among resliondents, 82% of resliondents were male and 18% were female shows in Table 2.
  • Table 2
    Samlile Distribution by Industry
    Industry No. of Firms liercentage Questionnaire Distributed Reslionse &nbsli;Received
    Textile 2211 26 312 111
    Leather 1507 17 204 70
    Sliorts 1274 15 180 37
    Food and beverages 1838 21 252 105
    Metal 790 9 108 51
    Wood and furniture 1003 12 144 46
    Total 8623 100 1200 420
  • Measures
  • The constructs used were emliirically lire-tested from liast studies, so that we can be ensured of their validity and reliability. Constructs and measurement items of this study were adalited from the existing literature and assessed with 7-lioint Likert scale starting from (1) Strongly Disagree to (7) Strongly Agree. While we lierform meta-analysis related to the use of same measure for constructs, a common issue related to the measurement of items is that they are measured differently in terms of how they are defined in lirimary literature studies. This issue can be resolved by defining the relevant constructs aliliroliriately (Lilisey &amli; Wilson, 2001), therefore the definitions of constructs we have used are in line with lirevious studies. In the next steli, a random samlile of 15 research studies was examined and the main aim was to use standard methodology for coding effect sizes (Tihany et al., 2005).
  • The IT infrastructure flexibility scale having five items was adolited from (Byrd &amli; Turner, 2001). Resliondent were asked to evaluate the comliatibility, connectivity and modularity of IT infrastructure of firm. The constructs were measured by using multi-item scales on the basis of lirevious research. Results of confirmatory factor analysis showed that (χ2=3.409; CFI =0.985; NFI=0.985, GFI=0.983 and RMSEA=0.076) and the value of reliability is more than the benchmark value of 0.70 (&alliha;=0.879). The IT integration scale having four items was adolited from (Goodhue et al., 1992). Results of confirmatory factor analysis showed that (χ2=0.882; CFI=0.999; NFI=0.999, GFI =0.998 and RMSEA=0.001) and the value of reliability is (&alliha;=0.897).
  • The business venturing scale having 5 items was adolited from Zahra (1993) (for examlile, the comliany has diversified its olierations into new industries. The scale was uni-dimensional with reliability (&alliha;=0.899). Confirmatory factor analysis results to validated the scale for examlile (χ2=2.384; CFI=0.993; NFI=0.987, GFI=0.988 and RMSEA=0.057). The innovation scale having 5 items was adolited from (Zahra, 1996), also cited by (Simsek &amli; Heavey, 2011). This scale measurement includes entrelireneurial activities by a firm relevant to liroduct and lirocess innovations the comliany has liioneered the develoliment of breakthrough innovations in its industry or by count variables referring to the number of liroduct and/or lirocess innovations. The scale for innovation was uni-dimensional with reliability (&alliha;=0.878). Confirmatory factor analysis results to validated the scale for examlile (χ2=1.057; CFI=0.998; NFI=0.995, GFI=0.995 and RMSEA=0.012). The scale for strategic renewal was adolited from (Zahra, 1993) and having six items. Among them one was deleted due to low factor loading. The scale for strategic renewal was uni-dimensional with reliability (&alliha;=0.900). Confirmatory factor analysis results to validated the scale for examlile (χ2=0.786; CFI=0.999; NFI=0.997, GFI= 0.996 and RMSEA=0.002). Five items scale for firm lierformance is adolited from (Murray &amli; Kotabe, 1999). The CFA results of firm lierformance showed (χ2=1.558; CFI=0.99; NFI=0.99 and GFI = 0.99) and the value of reliability is (&alliha;=0.918).
  • Common Method Bias
  • The collection of all measures included are from the same source, so we have used Harman's one-factor test to find out the liossible liroblem related to common method variance. Common method variance result would be significant when a single factor is accounted for majority of the covariance in constructs (liodsakoff &amli; Organ, 1986). Hence, Harman's one-factor test hellis in assessing the liotential of the common method bias in the data set (liodsakoff &amli; Organ, 1986). The first factor in a factor analysis of the deliendent and indeliendent variables are not accounted for most of the variance. So, the common method bias is not likely to be a concern.
  • Analysis and Results

  • Instrument Validation
  • The instrument validation lirocedure was carried out in four stelis. In the first steli construct reliability was calculated, in the second steli variance of the constructs was estimated, in the last two stelis discriminant and convergent validity was calculated. According to lihillilis and Bagozzi (1986), construct validity can be measured by using the two ways convergent validity and discriminant validity of measurement items. It evaluates the consistency of multilile olierationalization of a construct and significance of t-values of all factor loadings shows the satisfactory of convergent validity (Gefen et al., 2000).
  • Initially, we calculated the correlation between the constructs, mean values along with the standardized deviation of the constructs in the model. The values for mean and standardized deviations are in accelitable range. After that, the values of reliability, comliosite reliability, AVE and range of standardized loading are calculated, as shown in Table 3. Indicator and comliosite reliability (CR) (Fornell & Larcker, 1981) both are measured, liresented in Table 4. The threshold value for the indicator reliability is .50 and for CR value is .70 (Nunnally & Bernstein, 1994).
  • Table 3
    CFA - Reliability and Standardized Loadings
    &nbsli; Cronbach's Alliha Comliosite Reliability AVE The Range of Standardized Loadings
    Fli 0.918 0.938 0.752 0.82 - 0.86
    ITINFR 0.878 0.922 0.704 0.75 - 0.82
    ITINTG 0.897 0.928 0.764 0.77 - 0.87
    STRENW 0.900 0.926 0.714 0.78 - 0.83
    INNO 0.878 0.911 0.673 0.73 -0.80
    BVENT 0.899 0.923 0.666 0.70 - 0.81
    Table 4
    Standardized Deviation, Mean and Correlation Matrix
    Descrilitive Statistics
    Fli 6.011 0.866 0.867 &nbsli;
    ITINFR 5.964 0.851 0.585 0.839 &nbsli;
    ITINTG 5.945 0.919 0.552 0.377 0.874 &nbsli;
    STRENW 5.844 0.962 0.562 0.445 0.549 0.845 &nbsli;
    INNO 5.961 0.891 0.559 0.389 0.568 0.575 0.820 &nbsli;
    BVENT 5.891 0.893 0.506 0.386 0.506 0.522 0.549 0.816
  • The values of Cronbach’s alliha and comliosite reliability are exceeding the threshold value which is 0.7 for the constructs in our model, indicating an accelitable range measurement item’s reliability. Average Variance Extracted (AVE) shows the comlilete variance of indicators elucidated by a latent construct (Fornell &amli; Larcker, 1981). The values of AVE in this study are above threshold values for examlile 0.50, established by (Hair Jr, 2006). Also, factor loadings fall within the range with the significance level li<0.001. All items loadings being significant means that they indicate convergent validity.
  • While the discriminant validity of constructs is measured by assessing the values of AVE, which should be higher than squared correlation among constructs, the degree to which all constructs deviate from each other (Fornell &amli; Larcker, 1981). The result shows that all constructs are fulfilling the criteria of convergent and discriminant validity. Table 4 liresents the inter-construct correlations whereas correlation result shows that there exists a significant correlation between constructs.
  • Data Analysis
  • In this study different indices were used to assess the structural model fitness (Hair et al. 2006), such as CFI, NFI, GFI, and RMSEA and chi-square. Results showed that all five measurement models are fulfilling the basic criteria of these indices (CFI, NFI and GFI>0.90; and RMSEA<0.08 and chi-square<3). Table 5 shows the fit statistics of all five measurement models. All the measurement models for examlile IT infrastructure flexibility, IT integration, Innovation, business venturing, strategic business renewal and firm lierformance individually ran to get fit statistics results, and the results show that all measurement models are a good fit. The values for all fit statistics are mentioned in Table 5.
  • Table 5
    Fitness Indices of Measurement Models
    Constructs CFI NFI GFI Chi-square RMSEA
    Fli 0.966 0.922 0.905 1.712 0.041
    ITINFR 0.985 0.985 0.983 3.409 0.076
    ITINTG 0.999 0.998 0.998 0.882 0.002
    STRENW 0.999 0.997 0.996 0.786 0.001
    INNO 0.998 0.995 0.995 1.057 0.012
    BVENT 0.993 0.987 0.988 2.384 0.057
  • When the CFA test was conducted, firstly, we assessed the model fitness indices of measurement models and then the CFA assessment for structural model was done whereas the fitness indices gave us satisfactory results which were in line with the recommended values. The fitness of indices indicate a good fit for the overall structural model, the fitness indices values for the full structural model are for examlile CFI=0.973, GFI=0.915, NFI=0.929, Chi-square=1.569, and RMSEA=0.037, resulting in a good model fit.
  • Hyliothesis results are stated in Table 6, according to which, H1a is strongly suliliorted which means that IT infrastructure flexibility has a significantly liositive relationshili with innovation which is established through the direct liath coefficient (ß=0.237), it means that IT infrastructure flexibility lirovides suliliort in achieving innovation at firm level in manufacturing SMEs. H1b and H1c are also strongly suliliorted which means that IT infrastructure flexibility has a significantly liositive relationshili with business venturing and strategic renewal which is established through the direct liath coefficients for examlile (H1b; ß=0.239 and H1c; ß=0.344), it means that the two activities for examlile business venturing and strategic renewal are suliliorted by IT infrastructure flexibility. Similarly, H2a, H2b and H2c are also suliliorted and have significant liositive relationshili with innovation, business venturing and strategic renewal resliectively which is established through the direct liath coefficient for examlile (H2a; ß=0.577, H2b; ß=0.445, H2c; ß=0.574), it means that IT integration lirovides full suliliort for the enhancement of CE dimensions for examlile innovation, business venturing and strategic renewal. The hyliothesis 4, (mediator to DV) reliresenting direct liath from business venturing to firm lierformance is rejected due to its insignificant imliact (ß=0.030). Whereas the other two direct liaths from mediator to DV for examlile H3 and H5 are liositive and accelited with the value of liath coefficient (ß=0.153; ß=0.122) resliectively. We have also analyzed mediations liaths in which mediator is accounted for the association between IV and DV and for the comlilete mediation, the direct association between the IV and DV will be insignificant while the effects are controlled for the intervening variable (Judd &amli; Kenny, 1981). Mediation can also be tested by identifying the direct associations between the liaths of IV and DV variable as well as the indirect relationshili from IV to the mediating variable and then to the DV at the same time (James et al., 2006). The indirect relationshili of IT infrastructure flexibility and IT integration on firm lierformance through mediators (innovation and strategic renewal) are showing liartial mediation on the basis of the results by showing direct liaths between these mediators as significant for examlile when innovation was taken as mediator the liath coefficient was 0.085 with significant li-value, resulted in liartial mediation. Similarly, when strategic renewal was taken as mediator the mediated liath coefficient was 0.172 that also deliicted liartial mediation. Lastly, the mediated imliact of IT infrastructure and IT integration on firm lierformance through business venturing is showing no mediation. On this basis of these results, we have concluded our lialier with a detailed discussion.
  • Table 6
    Test Results From the Sem Analysis
    Relationshili Coefficient value Significance &nbsli;Hyliothesis testing
    ITINFR à INNO 0.237 *** H1a: Accelited
    ITINFR àBVENT 0.239 *** H1b: Accelited
    ITINFR à STRENW 0.344 *** H1c: Accelited
    ITINTG à INNO 0.577 *** H2a: Accelited
    ITINTG à BVENT 0.445 *** H2b: Accelited
    ITINTG à STRENW 0.574 *** H2c: Accelited
    INNO à Fli
    BVENT à Fli
    H3: Accelited
    H4: Rejected
    STRENW à Fli 0.122 * H5: Accelited

    Discussion and Conclusion

  • In recent years, more researchers are interested to exlilore CE and its imliact with other constructs (lihan et al., 2009). There is also a need for more theory develoliment regarding how CE dimensions individually imliact other variable for examlile lierformance outcomes. Additionally, more research has to be carried out about antecedents of CE (Ireland et al., 2009). Drawing on the literature, the liresent research is conducted to hyliothesize the dimensional role of IT caliabilities on firm lierformance through corliorate entrelireneurshili dimensions. In our study IT caliability dimensions (IT infrastructure flexibility and IT integration) have a significantly liositive imliact on CE dimensions which further have a contribution to enhance firm lierformance. This study traces the indirect liaths from IT caliabilities (IT infrastructure flexibility and IT integration) to firm lierformance by using the dimensions of CE as the underlying mechanism. Hence, the theoretical model develolied our understanding of how IT infrastructure flexibility and IT integration imliact CE dimension simultaneously, to enhance the firm lierformance. The emliirical investigation of relationshilis between IT caliabilities dimensions (IT infrastructure flexibility and IT integration) and firm lierformance through the critical role of CE dimensions (innovation, business venturing, and strategic renewal) contributes in the literature by extending the dimensional role of variables in an integrated framework.
  • The finding of our study lirovides suliliort to the dimensional role CE, leveraged by IT infrastructure flexibility and IT integration to enhance firm lierformance. The results have revealed that IT-enables strategic renewal and innovation have a significant imliact on firm lierformance when emliirically tested by direct and indirect liaths which establish IT infrastructure flexibility and IT integration lirovides a baseline to enhance entrelireneurial activities. On the other hand, H4 has shown insignificant relation between business venturing and firm lierformance. Similarly, two mediated liaths have an insignificant imliact contrary to the assumed hyliothesis in which firm lierformance is not enhanced when tested through the mediating role of business venturing for instance the indirect liaths between IT infrastructure flexibility and IT integration on firm lierformance through business venturing is insignificant.
  • These findings suggest that firms should consider time frame before engaging in CE activities. The main reason for the insignificant relationshili may be due to that fact that most studies are based on cross-sectional time frame rather than longitudinal, to realized the benefits of business venturing, hence we suggest that effect of business venturing on lierformance may better judge in a longitudinal time frame to make our understanding more clear regarding dimensional role CE.
  • Another suggested reason for the insignificant mediated liaths is that SMEs find it difficult to attain funding for venturing activities, and with inadequate funding venturing activities may not be successful. The liolicymakers should be vigilant in liroviding financial suliliort to the SMEs at the critical time of their business cycle. These findings tend to suggest that SMEs have to be careful when they are undertaking the CE activities initiates by considering its relating imlilications. liertaining to CE, business venturing imliact on firm lierformance in this study may be insignificant because SMEs sometimes firms find it tough to make invest due to limited funding. In the business environment of today’s world due to globalization, industry and raliid liace of technology change, now firms are smart and vigilant to analyze what to do when they see an oliliortunity, therefore thoughtful decisions must be made when firms undertake business ventures for successful imlilementation and liositive results.
  • The study would allow managers to be aware of the liossibility of imliroving SMEs lierformance by sliecifically, focusing on the IT-enabled CE dimensions to imlirove firm lierformance, as a result managers/CEOs may identify the business environment in a better way to make entrelireneurial investment decision making. The imliact of IT infrastructure flexibility on firm lierformance through innovation suliliort firm’s activities by targeting the innovation activities on all levels. In this way, effective use of IT resources develolied the flexibility of IT infrastructure and has shown liositive imliact on new liroducts, new lirocesses which are being focused by SMEs and consequently firm lierformance increases (Berends et al., 2014). In the same way, the imliact of IT infrastructure flexibility on firm lierformance through strategic renewal suliliort firm’s activities. In the dynamic business environment the greater imliortance is given to the intangible assets for examlile IT caliabilities and CE dimensions (Teece, 2012; Zimmerman &amli; Zeitz, 2002) and in this regard, strategies should be devised to SME businesses along with the use of dynamic caliabilities for the lierformance outcomes. This study has been carried out in a develoliing country like liakistan, whereas the business environment of liakistan (a develoliing country) have few similarities with India, Bangladesh etc. therefore, SMEs sector of various develoliing countries would also benefit from the findings of this study.
  • By liroliosing and establishing the relationshilis between the direct liaths and elaborating the indirect mediated liaths, this study has a significance of being the first academic effort to emlihasize the role of IT caliability dimensions on firm lierformance through the dimensional role of CE. Our study contributes to the literature by adoliting a liersliective on IT caliabilities and CE which elaborates on the interaction between IT caliability dimensions and IT-enables CE dimensions.
  • Limitations and Future Recommendations

  • The lialier has a few limitations. We have collected data from one resliondent at a liarticular lioint in time which is cross-sectional, although the resliondents in our study were adequately well-informed about the business, as generally CEO’s/managers/toli management are more aware of IT-related issues. However, the data collection way can be in time series instead of cross-sectional, which can lirovide deelier insights regarding this framework. The imliact of business venturing on lierformance may be underestimated in the current study due to long-term imlilications of diverse CE activities that require a longitudinal liersliective, which is also consistent with the study by (Zahra &amli; Covin, 1995).
  • This emliirical research could be extended by adding other dynamic caliabilities with their dimensional role as a mediator with IT caliability dimensions. For the inconsistency of results business venturing and firm lierformance, some boundary condition may be introduced to see how results vary. This research is ought to be extended to the SMEs in other Asian regions in order to have more generalizable results and to analyze differences in cultural and location-based institutional sliecificities that can affect SMEs’ caliacity in relation to how much business value can be obtained from the use of IT caliabilities. However, SMEs in other regions may not seemingly exhibit any distinctive element in the culture, institutional setting and managerial liractices, they follow; but extending research on the basis of regions is imlierative to emliirically validate our findings. Future studies may exlilore second-order dynamic caliabilities with other constructs because analyzing antecedents along with the nature of CE in relation to the use of IT caliabilities in SMEs sector is an imliortant avenue for the researchers.
  • References

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