An empirical investigation of the relationship of IS strategy with firm performance

Given the important impact that an IS strategy has on the potential value IS brings to an organization, we develop and test a model of IS Strategy and Firm Performance. Our survey-based study provides strong evidence that firms with defined IS strategies (either IS Innovator or IS Conservative) perform better than those without defined IS strategies. Organizations without a clearly defined IS strategy actually experienced a negative relationship with firm performance. These organizations should realize the potentially negative outcomes of such a lack of strategy and work to extricate themselves before a consistent pattern of investing in IS without clear organizational benefit develops. Furthermore, the study suggests that the IS Innovator strategy is, in particular, associated with more superior firm performance than the IS Conservative strategy under conditions of environmental dynamism. Organizational leaders need to consider the external environments under which their organizations are operating and evaluate the influence those environments may have on their IS strategy's ability to impact performance. Post hoc analysis results also reveal a fourth potential IS strategy, one that strives for ambidexterity. Ambidextrous firms were found to be associated with the most superior performance, leading to a potential extension of the existing IS strategy typology and a call for future research. © 2011 Elsevier B.V. All rights reserved.