The impact of IT–business strategic alignment on firm performance: The evolving role of IT in industries

Abstract

This study proposes and validates a new industry taxonomy to understand the use of IT that generates superior economic returns based on the specific economic and competitive characteristics of four different industry types and the strategic role of IT in each of these industry environments. Our findings extend the well-established industry taxonomy on the strategic role of IT (Automate, Informate, Transform) by considering how IT is changing the nature of the product/service in industries where transformational logics prevail. We found that in industries where the product/service is digital in nature, the firms that achieve higher economic returns are those where IT is used to support dual strategies based on the integration of cost leadership and differentiation. Conversely, in other industries – with the exception of those producing commodities – the firms that achieve superior returns are those that use IT to support differentiation. The results of this study can help managers make intelligent decisions about competitive strategies and IT investments, depending on the business environment of the sector in which the firm operates and the generative potential of emerging technologies to do new things.