An emerging literature, grounded in the resource-based view of the firm, suggests that IT capabilities, embedded in firm-specific routines, can provide superior firm performance. However, the IT capabilities construct is complex and multi-dimensional, and there exist several IT capabilities that a firm must choose among to invest in. Prior research has implicitly assumed that a greater endowment of IT capabilities is a superior organizational outcome. Drawing upon resource- and knowledge-based views of the firm and the configurational approach as conceptual foundations, we hypothesize that distinct patterns of investment across eight key business-oriented IT capabilities, that may be broadly grouped into intra-firm process integration capabilities, external-facing relational capabilities, and business strategy and IT vision alignment capabilities, are best suited to different strategic orientations. We classify firms into strategic archetypes using an extension of Miles and Snow’s original strategy archetypes. We employ a profile deviation approach to assess the impact of fit between business strategy and IT capability on firm performance. By using two sets of ideal profiles – one theoretical and the other empirical – we are able to validate our findings and derive appropriate benchmarking strategies for firms. Our hypotheses are tested using survey data collected from 64 firms, and objective performance measures obtained from secondary sources. Findings support the argument that there is no one universal IT capability profile that is optimal for all firms, and that the best IT strategy is one where investment across various IT capabilities matches the needs specified by the strategy archetype that the firm resembles. Implications for research and practice are discussed, along with future directions.
Keywords: IT capability, strategy archetype, resource-based view, knowledge-based view, ideal profiles, configurations, Miles and Snow, business-oriented IT capabilities