alignment of information technology performance of saudi …
TRANSCRIPT
ALIGNMENT OF INFORMATION TECHNOLOGY
STRATEGY AND BUSINESS STRATEGY: A STUDY
ON ITS INFLUENCE ON THE BUSINESS
PERFORMANCE OF SAUDI ARABIA INDUSTRIAL
SMALL AND MEDIUM ENTERPRISES
BY
MAJED MOHAMMED ALYAHYA
A thesis submitted in fulfilment of the requirement for the
degree of Doctor of Philosophy in Information Technology
Kulliyyah of Information and Communication Technology
International Islamic University Malaysia
JULY 2016
ii
ABSTRACT
As competition across the globe continues to intensify at a rapid pace, small and
medium enterprises (SMEs) are required to adapt effective tools to improve their
competitiveness. The experiences of the large sized companies reveal that the alignment
between the business and IT strategies in the organization will effectively enhance their
competitiveness, which is characterized by the improved operational efficiency and
innovativeness. Having acknowledged the significance of the strategic alignment in
elevating the competitiveness of large sized business organizations, it is important to
investigate whether such approach plays a significant role in improving the
competitiveness of SMEs. Specifically, this study examines the effect of strategic
alignment on the performance of Saudi industrial SMEs, and the role of organizational
cultures in moderating the relationship between strategic alignment and organizational
performance. Both fax and web-based survey techniques have been used to collect data
from Saudi manufacturing companies. A structural equation model was developed
based on Strategic Alignment Model (SAM) of Henderson and Venkatrman (1999) to
evaluate the role of strategic alignment on organization performance, and the
moderation effect of organizational cultures. With 167 effective responses collected
from the business executives of the participating Saudi manufacturing SMEs, the partial
least square structural equation model (PLS-SEM) has been used to empirically test the
model. The results of this study suggest that the alignment between business and IT
strategies significantly improved the performance of Saudi manufacturing SMEs,
however, organizational cultures did not play a major role in moderating the relationship
between the two constructs. The research findings of this study have two industrial
implications. First, since the achievement of proper alignment between business and IT
strategies will improve the business performance of Saudi manufacturing SMEs,
government institutions are suggested to provide more financial and human capital
training support to assist these enterprises to be competent in achieving the state of
alignment. Second, Saudi manufacturing SMEs should not put too much emphasis on
seeking and developing the most appropriate cultures in their organizations in hope of
improving their business performance with the alignment. Rather, more effort should
be dedicated to ensure the achievement of strategic alignment in the organization.
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ملخص البحث
ن تتفاعل مع أالعالمي، فإن على المنشآت الصغيرة والمتوسطة ىلمستو امع استمرار زيادة حدة المنافسة على ستراتيجية بين ن الموائمة الإأظهرت تجارب المنشآت الكبيرة أدوات المناسبة لزيادة قدرتها التنافسية. لقد الأ، والتي تتمثل بتحسين كفاءة التشغيل ةالتنافسيوتقنية المعلومات سوف تعزز بفاعلية القدرة ،عمالالأ
عمال الكبيرة، فإنه ت الأآستراتيجية في رفع القدرة التنافسية في منشهمية دور الموائمة الإأوالابتكار. وبإقرار ت الصغيرة آفي تحسين القدرة التنافسية للمنش بارزا دورا ؤديذا كان هذا النهج سيإمن المهم التحقق فيما
داء المنشآت أستراتيجية على الدراسة ستبحث تأثير الموائمة الإوجه التحديد فإن هذه والمتوسطة. وعلىشأة على العلاقة بين الموائمة المن ثقافةالسعودية، وتأثير المملكة العربية الصناعية الصغيرة والمتوسطة في
العنكبوتية لجمع الشبكةالمبنية على والاستبانةستراتيجية وأداء المنشأة. لقد تم استخدام كل من الفاكس الإستراتيجية ساس نموذج الموائمة الإأالبيانات من المنشآت الصناعية السعودية. وقد تم تطوير نموذج على
(SAMلهندرسون )، ثقافةداء المنشآت، وتأثير أستراتيجية على لإان. وذلك لتقييم دور الموائمة اوفنكترام استجابة مكتملة من مدراء المنشآت الصناعية السعودية، 167لحصول على المنشأة على هذه العلاقة. وبا
النموذج المطور. وتشير نتائج هذه لاختبار( PLS-SEMفقد تم استخدام نمذجة المعادلة البنائية )داء أعمال وتقنية المعلومات سوف تحسن بشكل ملحوظ ستراتيجية بين الأن الموائمة الإألى إالدراسة
ي دور ملحوظ في التأثيرأ ؤديوسطة، ولكن ثقافة المنشأة لا تناعية السعودية الصغيرة والمتالمنشآت الصثار المترتبة من نتائج هذه الدراسة على المنشآت الصناعية تتكون من شقين. ن الآإعلى هذه العلاقة.
داء أعمال وتقنية المعلومات ستزيد من ستراتيجية المناسبة بين الألى الموائمة الإإن الوصول أبما :ولفالأن تقوم الهيئات الحكومية بزيادة الدعم أمن المقترح إنه المنشآت الصناعية السعودية الصغيرة والمتوسطة، ف
ستراتيجية. كون قادرة على تحقيق الموائمة الإالمالي وتطوير القوى البشرية فيما يساعد هذه المنشآت حتى تتركز على السعي لتطوير ثقافة المنشأة ألات السعودية الصناعية الصغيرة والمتوسطة ن على المنشآأ :والثاني
ستراتيجية تركز جهودها لتحقيق الموائمة الإ نأداء من الموائمة، فبدلا من ذلك عليها على أمل تحسين الأ .عمال وتقنية المعلومات في المنشأةبين الأ
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APPROVAL PAGE
This thesis of Majed Mohammed Alyahya has been approved by the following:
--------------------------------------
Mohd Adam Suhaimi
Supervisor
--------------------------------------
Asadullah Shah
Internal Examiner
-------------------------------------
Adnan Jamaluddin
External Examiner
-------------------------------------
Mohammed Zeki Kheder
External Examiner
--------------------------------------
Nik Ahmad Hisham Ismail
Chairman
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DECLARATION
I hereby declare that this thesis is the result of my own investigation, except where
otherwise stated. I also declare that it has not been previously or concurrently submitted
as a whole for any other degrees at IIUM or other institutions
Majed Mohammed Alyahya
Signature ............................................... Date....................................
vi
INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA
DECLARATION OF COPYRIGHT AND AFFIRMATION OF
FAIR USE OF UNPUBLISHED RESEARCH
ALIGNMENT OF INFORMATION TECHNOLOGY STRATEGY AND
BUSINESS STRATEGY: A STUDY ON ITS INFLUENCE ON THE
BUSINESS PERFORMANCE OF SAUDI ARABIA INDUSTRIAL SMALL
AND MEDIUM ENTERPRISES
I declare that the copyright holder of this thesis is Majed Mohammed Alyahya
Copyright © 2016 Majed Mohammed Alyahya. All rights reserved.
No part of this unpublished research may be reproduced, stored in a retrieval system,
or transmitted, in any form or by any means, electronic, mechanical, photocopying,
recording or otherwise without prior written permission of the copyright holder except
as provided below.
1. Any material contained in or derived from this unpublished research may
only be used by others in their writing with due acknowledgement.
2. IIUM or its library will have the right to make and transmit copies (print or
electronic) for institutional and academic purposes.
3. The IIUM library will have the right to make, store in a retrieval system
and supply copies of this unpublished research if requested by other
universities and research libraries.
By signing the form, I acknowledged that I have read and understand the IIUM
Intellectual Property Right and Commercialisation policy.
Affirmed by Majed Mohammed Alyahya.
……..……..………… ……..……..………
Signature Date
vii
To all the people who gave me their support and prayers
viii
ACKNOWLEDGEMENTS
First and foremost, all praise be to Allah, Lord of all creation. I thank my parents, my
family and the leadership of Saline Water Conversion Corporation (SWCC) for their
support throughout this PhD journey. The Chairman of the Board H.E. Abdulah Al-
Hossein the Minster of Water and Electricity. The Governor H.E. Dr. Abdulrahman Al-
Ibrahim. The deputy governor for Planning and Development Dr. Abdullah Al-
Alshaikh. The acting deputy governor Abdullah Alabdulkareem. The IT Director
Mohammed Aljasser. As well as all my co-workers at SWCC.
Then I would like to express my unlimited thanks to Professor Dr. Mohd Adam
bin Suhaimi, for his supervision of my work. He was always helpful with his advice and
guidance, even with his busy schedule as the Dean of KICT and then the Director of
ITD. I feel he is giving me the time I need, as if I was his son. Most often we stayed till
after working hours for me to get the advice I need to proceed with my research. I admire
his kindness, May Allah reward him with all the best in this world and hereafter. I also
thank the people at IIUM. The Dean of KICT, the Deputy Dean of KICT for post
graduate studies, the Head of the Information Systems department, the Academic staff,
the administrative staff, post graduate colleagues and CPS staff.
Finally, I like to thank those that provided me with the information needed about
SMEs in Saudi Arabia. Louay Redwan from the Ministry of Commerce and Industry.
Abdullah Alrasheed from Saudi Industrial Development Fund. Dr. Ahmed Yehia from
Saudi SMEs Guarantee Financing Program. Fowaz Alsheani from the Chamber of
Commerce and Industry.
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TABLE OF CONTENTS
Abstract .......................................................................................................................... ii
Abstract in Arabic ......................................................................................................... iii
Approval Page ............................................................................................................... iv
Declaration ..................................................................................................................... v
Copyright Page .............................................................................................................. vi
Dedication .................................................................................................................... vii
Acknowledgements ..................................................................................................... viii
List of Tables ................................................................................................................ ix
List of Figures .............................................................................................................. xii
CHAPTER ONE: INTRODUCTION ........................................................................ 1 1.1 Background of the Study ............................................................................. 1
1.2 Problem Statement ...................................................................................... 3
1.3 Objective of this Study ................................................................................ 4
1.4 Significance of the Study ............................................................................ 6
1.5 Organization of the Study ........................................................................... 7
CHAPTER TWO: LITERATURE REVIEW ........................................................... 9 2.1 Introduction ................................................................................................. 9
2.2 Business Strategy ........................................................................................ 9
2.2.1 Definition ........................................................................................... 9
2.2.2 Measurement or Model .................................................................... 11
2.2.3 Effects on Performance ................................................................... 14
2.3 Information Technology (IT) Strategy ...................................................... 16
2.3.1 Definition ......................................................................................... 16
2.3.2 Measurement or Model .................................................................... 19
2.3.3 Effects on Performance ................................................................... 22
2.4 Strategic Alignment .................................................................................. 24
2.4.1 Definition ......................................................................................... 24
2.4.2 Measurement or Model .................................................................... 26
2.4.3 Effect on Performance ..................................................................... 30
2.5 Small And Medium Enterprise ................................................................. 32
2.5.1 Definition ......................................................................................... 32
2.5.2 Development and Importance .......................................................... 35
2.6 Organizational Performance...................................................................... 38
2.7 Organizational Culture .............................................................................. 40
2.7.1 Definition ......................................................................................... 40
2.7.2 Measurement ................................................................................... 41
2.7.3 Effect on Performance ..................................................................... 45
CHAPTER THREE: RESEARCH FRAMEWORK .............................................. 49 3.1 Introduction ............................................................................................... 49
3.2 Critical Review.......................................................................................... 49
3.3 Research Hypotheses ................................................................................ 52
3.4 Research Model ......................................................................................... 56
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3.4.1 Business Strategy ............................................................................. 57
3.4.2 IT Strategy ....................................................................................... 58
3.5 Strategic Alignment Between IT and Business Strategies ........................ 60
3.6 Organizational Culture .............................................................................. 62
3.7 Organizational Performance...................................................................... 63
CHAPTER FOUR: RESEARCH DESIGN ............................................................. 66 4.1 Introduction ............................................................................................... 66
4.2 Research Approaches ................................................................................ 67
4.3 Information System (IS) Research Strategies ........................................... 69
4.3.1 Survey Research .............................................................................. 70
4.3.2 Experimental Research .................................................................. 701
4.4 Selection of Research Strategy ................................................................. 73
4.5 The Population and Sampling Frame ........................................................ 76
4.5.1 Population ........................................................................................ 77
4.5.2 Sampling Frame ............................................................................... 78
4.6 Sampling Method ...................................................................................... 79
4.7 Conducting the Survey .............................................................................. 80
4.8 Planning for Data Analysis ....................................................................... 81
CHAPTER FIVE: QUESTIONNAIRE CONTENT .............................................. 83 5.1 Introduction ............................................................................................... 83
5.2 The Design of the Questionnaire............................................................... 83
5.3 The Structure of the Questionnaire ........................................................... 87
5.3.1 Demographic Characteristics of the Company ................................ 88
5.3.2 Business Strategy ............................................................................. 89
5.3.3 IT Strategy ....................................................................................... 90
5.3.4 Organization Culture ....................................................................... 91
5.3.5 Organization Performance ............................................................... 92
5.4 Pre-Testing the Questionnaire ................................................................... 93
5.5 Pilot Survey ............................................................................................... 94
5.5.1 Reliability And Validity Analyses Of The Survey Instrument ........ 97
CHAPTER SIX: DESCRIPTIVE PROFILE OF THE RESPONSES ................ 105 6.1 Introduction ............................................................................................. 105
6.2 The Collected Data .................................................................................. 105
6.3 Demographic Profile ............................................................................... 112
6.4 Strategic Profile ....................................................................................... 114
6.5 Exploring Alignment Between Business and IT Strategy ...................... 116
CHAPTER SEVEN: PARTIAL LEAST SQUARE-STRUCTURAL EQUATION
MODELING APPROACH (PLS-SEM) ............................ 118 7.1 Introduction ............................................................................................. 118
7.2 The Background of SEM Studies ............................................................ 118
7.3 The Choice Between Covariance-Based Versus PLS-Based SEM
Approach ................................................................................................. 120
7.4 Procedures of the PLS Analysis .............................................................. 125
7.4.1 Sample Size Requirement .............................................................. 126
7.4.2 Type of Models .............................................................................. 126
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7.4.3 Higher Order Constructs ................................................................ 127
7.5 SmartPLS Analysis ................................................................................. 128
7.5.1 Step 1. To Create A Project ........................................................... 129
7.5.2 Step 2. To Create A Model ............................................................ 133
7.5.3 Moderator Variable ........................................................................ 138
7.5.4 Step 3: Model Calculation ............................................................. 140
7.5.5 Step 4: Output Reporting ............................................................... 141
7.5.6 Step 5: Bootstrapping .................................................................... 147
CHAPTER EIGHT: EMPIRICAL FINDINGS ON BUSINESS-IT STRATEGIC
ALIGNMENT ...................................................................... 150 8.1 Introduction ............................................................................................. 150
8.2 Reliability of the Reflective Measurement Models ................................ 150
8.3 Validity of the Reflective Measurement Models .................................... 153
8.4 Structural Model...................................................................................... 158
8.5 Second-Order Construct .......................................................................... 158
8.6 Path Coefficients for Structural Model ................................................... 162
CHAPTER NINE: CONCLUSION AND SUGGESTIONS FOR FUTURE
RESEARCH ........................................................................ 174 9.1 Discussion ............................................................................................... 174
9.2 Key Findings ........................................................................................... 177
9.3 Theoretical and Practical Implications .................................................... 179
9.4 Limitations and Suggestions for Future Research .................................. 180
9.5 Conclusion .............................................................................................. 181
REFERENCES ......................................................................................................... 182
APPENDIX I: Summary Tables of Literature Review .............................................. 195
APPENDIX II: Modified Measurement Models ....................................................... 205
APPENDIX III: Finalized Survey Questionnaires..................................................... 207
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LIST OF TABLES
Table 2.1 India SMEs Classification 34
Table 2.2 U.A.E SMEs Classification 35
Table 3.1 Miles and Snow’s Business Typology 58
Table 3.2 Parson’s Six Aspects of IT Strategies 60
Table 3.3 The Moderation Approach of Strategic ‘Fit’ 62
Table 3.4 Wallach’s Organizational Culture 63
Table 3.5 Performance Measurement 65
Table 4.1 Quantitative and Qualitative 68
Table 5.1 Business Strategy Measures 91
Table 5.3 Organizational Culture 93
Table 5.4 Organizational Performance Measures 94
Table 5.5 Comments and Corresponding Actions of the Pre-Test 96
Table 5.6 Comments and Corresponding Actions of the Pilot Survey 98
Table 5.9 Overall Reliability and Validity for Moderation Approach 105
Table 5.10 Discriminant Validity 106
Table 6.1 Frequency Distribution of Unattended Analytical Survey Items 109
Table 6.2 Summary Statistics on the Size of the Participating Firms 111
Table 6.3 Unengaged Response 113
Table 6.4 Usable Survey Dataset 114
Table 6.5 Frequency Distribution on the Demographic Characteristics of
the Respondents 117
Table 6.6 Descriptive Profile of the Strategic Characteristics 118
Table 6.7 Cross-Tabulation between Business Strategy and IT Strategy 120
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Table 7.1 Summarized difference between Covariance-Based and PLS-based
SEM Approaches 127
Table 8.1 Reliability Tests of Measurement Constructs 158
Table 8.2 Outer Loadings of Each Indicator 160
Table 8.3 Average Variance Extracted 162
Table 8.4 Discriminant Validity 163
Table 8.5 Correlations between Indicators of the First-Order Construct 167
Table 8.6 Path Coefficients between First-Order & Second-Order Construct 167
Table 8.7 R2 Values for the Full and Truncated Models 170
Table 8.8 Path Coefficients of the Full Structural Model 177
Table 8.9 Table Path Coefficients of the Truncated Structural Model 178
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LIST OF FIGURES
Figure 2.1 Strategic Alignment Model (SAM) 27
Figure 2.2 Strategic Alignment Process Model 28
Figure 3.1 Hypothesis 1 and 2 52
Figure 3.2 Hypothesis 3 53
Figure 3.3 Hypothesis 4 54
Figure 3.4 Hypothesis 5 55
Figure 3.5 Hypothesis 6 56
Figure 3.6 Research Model 57
Figure 3.7 Full Research Model 66
Figure 4.1 Steps for Data Analysis 83
Figure 7.1 SmartPLS Initial Window Screen Shot 132
Figure 7.2 File Menu Screen Shot 133
Figure 7.3 Project Name Screen Shot 134
Figure 7.4 Import Indicator Data Screen Shot 135
Figure 7.5 Selecting the File Screen Shot 135
Figure 7.6 Newly Created Project Screen Shot 136
Figure 7.7 Data Validation Screen Shot 137
Figure 7.8 The Validation Confirmation Screen Shot 137
Figure 7.9 Insertion Mode Screen Shot 138
Figure 7.10 Rename Object Screen Shot 138
Figure 7.11 Creation of the Latent Variables Screen Shot 139
Figure 7.12 Latent Constructs Screen Shot 141
Figure 7.13 Hide Measurement Model Screen Shot 142
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Figure 7.14 Create Moderating Effect Screen Shot 143
Figure 7.15 Interaction Effect Screen Shot 143
Figure 7.16 Algorithm Option Screen Shot 144
Figure 7.17 PLS Algorithm Default Options Screen Shot 144
Figure 7.18 SmartPLS Analysis Results Screen Shot 147
Figure 7.19 Maximum Iterations Screen Shot 148
Figure 7.20 Outer Loadings Screen Shot 149
Figure 7.21 Path Coefficient Screen Shot 150
Figure 7.22 Latent Variable Correlations Screen Shot 150
Figure 7.23 Overview Report Screen Shot 151
Figure 7.24 Selecting Bootstrapping Screen Shot 152
Figure 7.25 Bootstrapping Options Screen Shot 153
Figure 8.1 Reflective and Formative Constructs 165
Figure 8.2 Full-Model 179
Figure 8.3 Truncated Model 180
1
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In the era of globalization, business organizations are constantly seeking to harness
technologies to improve their core competency and gain competitive advantages in the
diverse and rapid changing marketplace (Li & Tan, 2012). Information Technology (IT)
is believed to be one of the most important powers needed by business firms to increase
their efficiency (Earl & Feeny, 1994; Huber, 1990; Henderson & Venkatraman, 1993;
Greenspan, 2000; Pickering & King, 1995), competitiveness (Delisi et al., 1998; Kalkan
et al., 2011; Peppard, 2010; Strnadl. 2002), and innovation (Luftman, 2003; Kalkan et
al., 2011). Explicitly, IT significantly promotes efficiency by reducing the cost of
obtaining, processing, and transmitting information (Porter & Millar, 1985), creates
competitive advantages by lowering cost, enhancing differentiation (Porter & Millar,
1985) and quickly circulates the advanced knowledge in the firm (Dewett & Jones,
2001), and facilitates innovation by creating a large and richer pool of codified
knowledge for employees to draw from when they engage in problem solving and
decision making (Dewett & Jones, 2001).
In order to improve firms’ business performance, a large amount of resources
have been invested in IT, including software, hardware, network, and data components
(Almajali & Dahalin, 2011). However, as Tarafdar & Qrunfleh (2010) found, from 2002
to 2004, nearly $100 billion to $150 billion worth of IT projects have failed and an
estimated 68% of IT projects have not fulfilled the originally stated business goals or
delivered the envisioned business benefits. It is believed that such wasted IT
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investments, failed IT projects, and the deployment of irrelevant applications and
technologies can be attributed to the absence of alignment between business and IT
strategies (Overby, 2008). Although has researches have provided mixed results on the
relationship between IT investments and the business performance of an organization
(Almajali & Dahalin, 2011; Cunes et al., 2003;), the alignment between business and
IT strategies is believed to be a significant enabler to improve the positive effect of IT
investments on the organizational success (Baets, 1992; Luftman & Brier, 1999; Neo,
1988; Raymond & Bergeron, 2008; Silvius et al., 2009; Tallon, 2007; Venkatraman &
Camillus, 1984). In other words, in order to remain competitive, firms not only need to
manage their IT investments strategically, they also need to ensure the proper alignment
between business and IT strategies (Almajali & Dahalin, 2011). Thus, from 2003 to
2011, the business and IT strategic alignment has remained to be one of the top concerns
of IT executives (Luftman & Ben-Zvi, 2011).
It has been well acknowledged that the Small and Medium Enterprises (SMEs)
sector played an important role in the economy, especially in galvanizing the economy,
creating jobs, and spurring growth (Adaileh, 2012; Aljitri, et al., 2003; World Bank,
2006). For instance, in the Kingdom of Saudi Arabia, SMEs have accounted for nearly
97 percent of the total enterprises in the kingdom (GOSI, 2008). Recently, there have
been increased reports on the increased use of IT by SMEs and of associated benefits
(Cragg & Mill; 2011; Lin et al., 2011). It has been perceived that the major reasons for
SMEs to develop IT is to cope with information overload (Farhoomand & Hrycyk,
1985), to increase competitiveness (Johnston et al., 2007; Sekaran, 2003), to enhance
operational efficiency (Beheshti, 2004; Levy et al., 2011), and to increase innovation
(Dibrell et al., 2008). However, in comparisons with large firms, small firms have been
more constrained by the limited resources to adopt the IT (Lin et al., 1993). Specifically,
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Lin et al. (1993) identified three major resource constrains faced by small firms, namely
the lack of financial resources, management resources, and the limited access to key
external information. In order to achieve sustainable competitive advantages, in a
similar way as large firms, SMEs should ensure the alignment between their business
and IT strategies (Chao & Chandra, 2012; Levy et al., 2011). Despite the importance of
business-IT strategic alignment on the business performance of SMEs, only trivial
efforts have been dedicated to this area of research (Beheshti, 2004; King et al., 2000;
Silvius, 2009).
Practically speaking, the alignment between business and IT strategies in the
organization is difficult to achieve. Because of the differences in objectives, incentives,
cultures, and perceptions of value, professionals from both business and IT departments
are unable to bridge the gap between them smoothly (El-Mekawy & Rusu, 2011). The
influence of the national culture on the way IT is perceived or used has been well
acknowledged in the past researches (Silvius, 2009). Although it is expected that the
alignment of business and IT strategies will be influenced by the organizational culture
factor, yet it has not been well studies in the past researches (Silvius, 2009; Silvius et
al., 2009). In addition, as organizations increasingly depend on IT to facilitate their
business process and networking, a more focused view on the role of the organizational
culture in fostering the alignment between business and IT strategies is highly
demanded (El-Mekawy & Rusu, 2011).
1.2 PROBLEM STATEMENT
In the era of globalization, business enterprises in the developing countries have to
compete both domestically and internationally to survive and hence prosper. Unlike
Multinational Corporations (MNCs) which have deep pockets to hire experienced
4
employees, and implement up-to-date technologies to sharpen their competitive edges,
SMEs in the developing countries can only utilize their limited resources to optimize
their efficiency, profitability, and competitiveness.
Having noted the potential benefit of IT in improving the efficiency of an
organization, the alignment between business and IT strategies is believed to be the
most effective solution for SMEs to survive and prosper in the ever competitive
environment. However, acknowledging the fact that researches on the alignment
between business and IT strategies have largely emphasized on large business
companies (Cragg, King, and Husnayati, 2002; Chao & Chandra, 2012; Kotha and Nair,
1995; Zhang, 2007), especially among the developed nations (Yayla & Hu, 2012),
further studies needed to be extended to SMEs in the developing nations. Besides,
having acknowledged the significant role of the organization culture in the effective
adoption of IT in an organization, further explorations on the impact of organization
culture on the business-IT strategic alignment are greatly needed.
1.3 OBJECTIVE OF THIS STUDY
During the last decade, voluminous empirical studies have concluded that the
organizations that successfully aligned their business strategies with their IT strategies
will lead to an enhanced competitiveness, and then an increased performance (Chan et
al, 2006; Tallon, 2008; Raymond & Bergeron, 2008; Schlosser et al., 2012). However,
studies pertaining to the impact of business-IT strategic alignment have been mainly
concentrated on the large business organizations in the developed nations.
Although there has been increased emphasis on the competitiveness in SMEs
(Lin et al., 1993), past researches have merely focused on the increased usage of IT and
of its associated benefits (Cragg & Mills, 2011). There is dearth of studies pertaining to
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the impact of business-IT strategic alignment on SMEs (Beheshti, 2004; King et al.,
2000; Silvius, 2009). Besides, little has been known on the influence of the organization
culture on the relationship between business-IT strategic alignment and organizational
performance of SMEs in the developing countries.
Having noted the above mentioned research constrains in the area of strategic
alignment, this study is aimed to explore the alignment of business and IT strategies
among SMEs located in the Kingdom of Saudi Arabia. Mainly the objectives of this
study are twofold:
1. To explore the impact of the business-IT strategic alignment on the business
performance of SMEs;
2. To investigate the impact of organization culture on the relationship
between strategic alignment and organizational performance.
In particular, this study will seek to answer the following questions:
1. What is the relationship between the business strategy, IT strategy and the
company performance in the Saudi SMEs?
2. What is the level of alignment between the business and IT strategies in the
Saudi SMEs?
3. Whether the alignment between the business and IT strategies will
significantly influence the performance of Saudi SMEs?
4. What is the relationship between the organizational culture and the
company performance in Saudi SMEs?
5. What is the effect of organizational culture on the relationship between
business-IT strategic alignment and organizational performance of the
Saudi SMEs?
6
1.4 SIGNIFICANCE OF THE STUDY
SMEs play a vital role in the economies across the world. They are the key generators
of employment and income, and the drivers of the innovation and growth. In the age of
globalized world, competition among business firms around the world has been ever
intensified. In order to remain competitive, SMEs have to harness IT to improve their
product competitiveness through lower cost of information processing, faster
communication with their customer, and better distribution channels. However, by
merely increasing firms’ IT investments cannot guarantee enhanced competitiveness
and improved business performance. Instead, a proper alignment between business and
IT strategies will bring about increased profitability, competitiveness and business
performance. However, most of the current researches have focused on large firms,
particularly among the industrialized countries. There is lacking of studies pertaining to
the business-IT strategic alignment in the context of SMEs, especially in the developing
economies.
One of the distinguished features of this study is on the exploration of the
business-IT strategies alignment among SMEs in the context of Saudi Arabia.
Furthermore, this study has a special focus on the impact of the strategic alignment on
the performance of the SMEs. Besides, the influence of the organizational culture on
the performance of SMEs has also been taken into account. It is expected that the results
of the research may provide some insights on the benefits of business-IT strategic
alignment on Saudi small and medium enterprises and how to properly achieve such
strategic alignment between the business strategy and the IT strategy, so they can
improve their performance
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1.5 ORGANIZATION OF THE STUDY
This dissertation contains nine chapters. A short explanation of each chapter is given as
following:
Chapter 1 provides the introduction to the research, which includes the overview
of the research background, the objectives of the study, the problem statements, and the
contributions of the research.
Chapter 2 includes an extensive literature review of the business-IT strategies
alignment. In particular, it covers various topics pertaining to the subject of the
alignment, namely the business strategy, IT strategy, organizational culture, Small and
Medium Enterprises, business performance, business-IT strategic alignment, strategic
alignment and business performance in large, medium and small firms, and the impact
of organizational culture on the relationship between strategic alignment and business
performance.
Chapter 3 outlines the framework of the research which contains the research
model, research hypotheses, and the variables adopted in this research.
Chapter 4 focuses on the research design of the study. In particular, the research
approach, research strategy, the determinants of population and sampling, the
procedures of conducting the survey, the steps of the research instrument refinement
process, and the plan of the data analysis are discussed.
Chapter 5 extensively discusses about the questionnaire content which covers
the design and structure of the questionnaire, how each of the variables are
operationalized and incorporated into the research questionnaire, and the validating
methods by which the questionnaire is evaluated.
Chapter 6 discusses about the profiles of the sample which includes the
descriptive statistics on characteristics of the responding companies.
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Chapter 7 gives an in-depth discussion on the Partial Least Square (PLS)
approach of the Structural Equation Modeling (SEM), as known as PLS-SEM. In
particular, such discuss covers three major topics, namely the background of the SEM
studies, the choice between Covariance-based (CB) and PLS-based SEM approach, and
the procedures to conduct PLS-SEM test using SmartPLS.
Chapter 8 presents the empirical testing results of the PLS-SEM analysis. The
results not only offer insights on the reliability and validity of the structural model, but
also address the validity of the hypotheses in our study.
Chapter 9 summarizes the findings of the research, outlines the implications for
both research and practices, and offers suggestions for the further research.
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CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
In this chapter, an extensive literature review has been conducted to explore the impact
of business-IT strategic alignment on the business performance of Small and Medium
Enterprises (SMEs). In order to grant a comprehensive understanding on the topic, all
subjects pertaining to the theme have been reviewed extensively. In particular, past
researches associated with business strategy, IT strategy, strategic alignment, SMEs,
and organizational performance have been reviewed. Among all the aspects related to
the subjects, this review primarily investigates the subjects from three dimensions,
including definition or development, model or measurement, and effects on the
organizational performance. In addition, since this research takes into account the
influence of organizational culture on the relationship between strategic alignment and
organizational performance, relevant researches related to organizational cultures have
also been reviewed. Lastly, considering the research has been confined in the context
of the Kingdom of Saudi Arabia, literature reviews on the five subjects will also take
into account past researches associated to the Kingdom.
2.2 BUSINESS STRATEGY
2.2.1 Definition
The term “strategy” has been defined differently among the past researches. To make it
simple, a strategy can be called as a plan which is designed to achieve certain goals in
the future. Technically, strategies in the context of business management can be defined