Aligning Information Technology and Business: The Differential Effects of Alignment During Investment Planning, Delivery, and Change

When does information technology (IT)-business alignment matter most for leveraging IT investment for firm performance? Drawing on dynamic capabilities theory, we posit that firms that focus on IT-business alignment at the later stages (i.e., the IT delivery stage and IT change stage) of the IT lifecycle are better able to translate their IT investment into revenue than firms that focus on IT-business alignment at the early stage (i.e., IT investment planning stage) of the IT lifecycle. To test our theory, we leverage archival data from more than 120 firms in India that differ in terms of where in the IT lifecycle they focused on IT-business alignment as the key priority. We find that the positive relationship between IT investment and firm revenue is stronger for firms that focus on IT delivery alignment or IT change alignment than for firms that focus on IT investment planning alignment. In addition, we find that at higher levels of IT investment, firms that focus on IT change alignment or IT delivery alignment have higher revenue than firms that focus on IT investment planning alignment, whereas at low levels of IT investment, firms that focus on IT investment planning alignment outperform firms that focus on IT delivery alignment or IT change alignment. Overall, the study contributes by documenting that IT-business alignment at the IT delivery stage and IT change stage of the IT lifecycle are more critical for leveraging IT investment for firm performance than IT-business alignment at the IT investment planning stage.