Paper Type

Completed Research Paper

Abstract

This paper contributes to our understanding of IT organizational arrangements in complex firms by focusing on the question of whether to conduct IT activities at the corporate or division level. It argues that co-location of IT resources at the SBU level is contingent on (i) the extent to which IT activities are a critical success factor in the focal industry, (ii) the competitive strategy followed by the focal SBU, and (iii) the SBU’s role within the internal network of cross-unit business synergies. Hypotheses are tested with data from a sample of 85 business units within 25 large diversified industrial firms. Findings suggest that the dominant logic for the allocation of IT resources in related diversified firms is the role of the SBU as either a provider or receiver of cross-unit services in the pursuit of corporate-wide synergies. This complements results from the prior literature on IT governance.

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Allocation of IT Resources in Complex Firms: The Alignment with Business and Corporate Strategy

This paper contributes to our understanding of IT organizational arrangements in complex firms by focusing on the question of whether to conduct IT activities at the corporate or division level. It argues that co-location of IT resources at the SBU level is contingent on (i) the extent to which IT activities are a critical success factor in the focal industry, (ii) the competitive strategy followed by the focal SBU, and (iii) the SBU’s role within the internal network of cross-unit business synergies. Hypotheses are tested with data from a sample of 85 business units within 25 large diversified industrial firms. Findings suggest that the dominant logic for the allocation of IT resources in related diversified firms is the role of the SBU as either a provider or receiver of cross-unit services in the pursuit of corporate-wide synergies. This complements results from the prior literature on IT governance.