How IT-Enabled Dynamic Capabilities Add Value to the Development of Innovation Capabilities

Introduction

Many organizations face intense pressure to transform their current business model and operations toward more sustainability, and innovation-driven organization (Dao, Langella, & Carbo, 2011; Hanelt, Busse, & Kolbe, 2016; Seidel, Recker, & Vom Brocke, 2013).

Major technology trends and developments like big data analytics, robotics, Internet of Things, and the rise of artificial intelligence are making firms’ ability to change and adapt its organizations’ structure, architecture, and people as crucial as its competitive strategy. However, merely possessing valuable, rare, inimitable and non-substitutional (VRIN) information technology (IT) resources within this day and age, is not enough to enhance organizational benefits and to maintain a competitive edge (Eisenhardt & Martin, 2000). Organizational capabilities, rather than IT assets, resources or products, have been suggested to be a critical competitive differentiator (Strønen, Hoholm, Kværner, & Støme, 2017; Teece, Pisano, & Shuen, 1997). These capabilities represent an organization’s potential to achieve specific business strategies and management objectives using focused deployment and are considered the building blocks on which organizations compete within the business ecosystem. Eisenhardt & Martin (2000) suggested that managers use these particular capabilities through integrating, building and reconfiguring internal and external competencies to achieve competitive advantage, rather than ‘simply’ possessing the capabilities (Eisenhardt & Martin, 2000; Strønen et al., 2017).

As the need to innovate increases in today’s business environment, IT is often an important supporting factor through adapting to its environment and meeting new demands while maintaining quality and efficiency (Rowe, Besson, & Hemon, 2017; Van de Wetering, Mikalef, & Helms, 2017). Previous studies posited the term IT capabilities, in this particular context, in an attempt to measure a firm’s proficiency in exploiting its IT assets. IT capabilities—firms’ ability to mobilize and deploy IT-based resources in combination or co-present with other resources and capabilities in order to differentiate from competition (Bharadwaj, 2000)—, have been viewed by past literature as complex, multidimensional constructs (Kim, Shin, Kim, & Lee, 2011; Pavlou & El Sawy, 2006; Sambamurthy, Bharadwaj, & Grover, 2003). Although there is a growing body of knowledge underscoring the pivotal role IT-enabled capabilities in the process of enhancing an organization’s competitive or financial performance gains (Kim et al., 2011; Mikalef, Pateli, & van de Wetering, 2016), there is considerably less scholarship about leveraging IT capabilities and obtaining innovation, and maintain a competitive edge in the business ecosystem through the development of IT-enabled dynamic capabilities (ITDCs) (Agarwal & Selen, 2009; Mikalef et al., 2016; Wade & Hulland, 2004). We define ITDCs as an organization’s ability to leverage its IT assets, resources, and IT competencies, in combination with other organizational resources and capabilities, in order to address rapidly changing business environments (Mikalef et al., 2016). Organizations that optimally deploy and enable their assets, resources, and organizational IT capabilities are more innovative and effective, and more promptly respond to constitutional changes in industry and market conditions than competitors (Aral & Weill, 2007). Hence, there is a clear call for scholars to investigate and unfold the mechanisms on how IT-enabled innovation is achieved, what the antecedent and conditioning role is of IT flexibility and ITDCs capabilities, and under which market conditions innovation can be achieved (El Sawy & Pavlou, 2008; Mikalef & Pateli, 2017; Van de Wetering, Mikalef, & Helms, 2017).