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On the Business Value of Information Technology: A Theory of Slack Resources

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Information Systems Theory

Part of the book series: Integrated Series in Information Systems ((ISIS,volume 28))

Abstract

This chapter provides insights on the business value of IT by theorizing the concept of IT slack and explaining its effects on firm performance. We define IT slack as the cushion of actual or potential IT resources that allow organizational adaptation to internal and external pressures and jolts. We elaborate a typology of IT slack based on two dimensions: the nature of the slack (i.e., IT artifact, human resource, or time) and the type of IT asset (i.e., IT infrastructure vs. IT application). We suggest that IT slack simultaneously affects both organizational effectiveness and efficiency. IT slack is a double-edged sword. While IT slack can improve organizational effectiveness, it might reduce efficiency, because slacks is, by ­definition, excess resources that remain idle until needed. We also suggest that the relationship between IT slack and organizational effectiveness is curvilinear.

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Notes

  1. 1.

    Some authors have named it “available” (Love and Nohria 2005) or “high discretionary” slack (Miner et al. 1990).

  2. 2.

    Chief Information Officer.

  3. 3.

    We have excluded cash type of slack from our IT slack typology because, according to our ­definition of IT slack, cash slack resource is more an organizational slack and not a type of IT slack.

  4. 4.

    Enterprise Resource Planning.

  5. 5.

    Asset specificity is considered as the flip side of the redeployability.

  6. 6.

    By productivity paradox at IT investment level, we mean that organization’s efficiency declines after an IT investment.

  7. 7.

    We thank one of the reviewers for suggesting this idea.

Abbreviations

CEO:

Chief executive officer

CIO:

Chief information officer

CRM:

Customer relationship management

ERP:

Enterprise resource planning

IS:

Information systems

IT:

Information technology

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Authors and Affiliations

  1. Desautels Faculty of Management, McGill University, 1001 Sherbrooke Street West, Montreal, QC, H3A 1G5, Canada

    Yasser Rahrovani

Authors
  1. Yasser Rahrovani
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  2. Alain Pinsonneault
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Correspondence to Yasser Rahrovani .

Editor information

Editors and Affiliations

  1. , School of Business and Economics, Swansea University, Singleton Park, Swansea, SA2 8PP, United Kingdom

    Yogesh K. Dwivedi

  2. IMD, Ch. de Bellerive 23, Lausanne, 1001, Switzerland

    Michael R. Wade

  3. Principia College, Maybeck Place 1, Elsah, 62028, Illinois, USA

    Scott L. Schneberger

Appendix A

Appendix A

IS capability

Dimensions

Subcategory

Definition

References

Technological capability

IT infrastructure

The physical IT assets that “comprise the computer and communication technologies and the shareable technical platforms and databases” (Bharadwaj 2000, p. 172)

Wade and Hulland (2004), Melville et al. (2004), Schwarz and Hirschheim (2003), Bharadwaj (2000), Zhu and Kraemer (2005), Tanriverdi (2005), Ray et al. (2005), Pavlou and El Sawy (2006)

IT application

A piece of software functionality that is developed and installed on specific IT platform(s) to perform a set of one or more business tasks independently of other surrounding IS components (Saraf et al. 2007, p. 321)

Melville et al. (2004), Saraf et al. (2007)

IT flexibility

“[T]he ability of an organization to incur relatively small penalties for departure from an optimal configuration of assets” (Saraf et al. 2007, p. 325)

Saraf et al. (2007), Peppard and Ward (2004), Ray et al. (2005), Clark et al. (1997)

Human resource capability

Technical IT skill

Technical abilities required for working with IT infrastructure and IT applications such as programming, system analysis, and design

Aral and Weill (2007), Wade and Hulland (2004), Melville et al. (2004), Bharadwaj (2000), Piccoli and Ives (2005), Ray et al. (2005), Pavlou and El Sawy (2006)

Managerial IT skill

Include abilities such as the effective management of IS functions, coordination and interaction with user community, and project management and leadership skills (Bharadwaj 2000, p. 173)

Bharadwaj (2000), Piccoli and Ives (2005)

Shared knowledge and relationship

“[C]ollaborative and harmonious relationships between IT and business managers so as to enable the sharing of knowledge and innovation risks and the joint ownership of technology-based initiatives” (Schwarz and Hirschheim 2003, p. 132)

Schwarz and Hirschheim (2003), Peppard and Ward (2004), Bharadwaj (2000), Piccoli and Ives (2005), Armstrong and Sambamurthy (1999), Ray et al. (2005), Pavlou and El Sawy (2006)

Integration capability

Integration with partner

“[T]he extent to which the IS applications of a focal firm work as a functional whole in conjunction with the IS applications” (Saraf et al. 2007, p. 325) of its business partners and customers

Barki and Pinsonneault (2005), Mithas et al. (2008), Wade and Hulland (2004), Schwarz and Hirschheim (2003), Saraf et al. (2007), Rai et al. (2006), Mitchell (2006), Barua et al. (2004)

Integration with customer

Barki and Pinsonneault (2005), Saraf et al. (2007), Schwarz and Hirschheim (2003), Mitchell (2006), Bharadwaj (2000), Barua et al. (2004)

Integration with internal functions

“[T]he extent to which the IS applications of a focal firm work as a functional whole” (Saraf et al. 2007, p. 325) between different departments

Bharadwaj et al. (2007), Tiwana (2009), Mithas et al. (2008), Wade and Hulland (2004), Schwarz and Hirschheim (2003), Rai et al. (2006), Peppard and Ward (2004), Mitchell (2006), Barua et al. (2004)

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Rahrovani, Y., Pinsonneault, A. (2012). On the Business Value of Information Technology: A Theory of Slack Resources. In: Dwivedi, Y., Wade, M., Schneberger, S. (eds) Information Systems Theory. Integrated Series in Information Systems, vol 28. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-6108-2_9

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