Impact of information technology on innovation in determining firm performance

Abstract

The aim of this study is to investigate the strategic relevance of Information Technology (IT). The study used resource-based theory to test if IT was a competitive resource, by examining the role it played between the constructs of innovation capability and firm performance. A cross-sectional study was conducted amongst 292 employees at the Hillside Aluminium Smelter in Richards Bay, South Africa. The results showed that a statistically strong positive relationship exists between innovation and firm performance (r = 0.616, p < 0.01). The results showed a moderate and statistically significant relationship between IT Capability and Innovation Capability (r = 0.563, p < 0.01). A favourable result for the moderator variable (p < 0.01) was found; however, the Innovation Capability as the independent variable showed an unfavourable result (p = 0.579). Multiple regression analysis showed that the model proved to be statistically significant (p < 0.01). It is therefore recommended that the drive for innovation as a key determinant of future firm competitive advantage must factor in technological capability, specifically information technology. Through the careful selection of IT resources and skills, IT capabilities displaying VRIN characteristics can be achieved, resulting in IT as a strategic resource.