A path analytic study of the effect of top management support for information systems performance

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Omega 32 (2004) 459 – 471 www.elsevier.com/locate/dsw

A path analytic study of the e$ect of top management support for information systems performance Bhanu S. Ragu-Nathana , Charles H. Apigianb;∗ , T.S. Ragu-Nathana , Qiang Tuc b College

a College of Business Administration, The University of Toledo, USA of Business, Middle Tennessee State University, Business and Aerospace Building N355 MTSU P.O. Box 45 Murfreesboro, TN 37132, USA c College of Business, Rochester Institute of Technology, USA

Received 13 June 2003; accepted 10 March 2004

Abstract Information systems (IS) have become a vital component of an organization’s competitive practices. Organizations have tried to di$erentiate themselves based on their use and adaptation of new information technology. Top management support (TMS) is a signi6cant factor in in7uencing the e$ectiveness of the IS function in an organization. The literature has conceptually supported this notion, but empirical evidence has been sparse. This paper develops a two-tiered framework for studying the relationship between top management support, the IS function, and IS performance. This conceptual model was empirically tested using structural equation modeling based on data collected through a survey instrument. The results support the direct and indirect relationships depicted in the model between top management support and IS performance. ? 2004 Elsevier Ltd. All rights reserved. Keywords: Top management; Information systems technology; Structural equation modeling; Path analysis

1. Introduction With rapid changes in information systems (IS) applications and sophisticated IS technologies that are continuing to become more a$ordable and easier to use, IS has evolved from being a back-o>ce infrastructure support to becoming an integral component of an organization’s business strategy. Earl and Feeny [1] have noted that “information systems is not a subset of strategy, in many instances, it is the business strategy”. However, even with an added strategic emphasis on IS, many organizations that have invested signi6cantly in information systems have not fully realized an improvement in productivity or performance [2]. The lack of productivity has been attributed to implementation and resource problems [3] as well as organization, hardware, and cost problems [4]. It has also been attributed to the lack of top management support (TMS) [5]. Teo and Ang [6] found ∗

Corresponding author. Fax: +1-615-898-2375. E-mail address: [email protected] (C.H. Apigian).

0305-0483/$ - see front matter ? 2004 Elsevier Ltd. All rights reserved. doi:10.1016/j.omega.2004.03.001

that a majority of organizations that had major problems, in the planning, development, or usage of IS attributed the problems to “failing to get top management support”. Sohal et al. [7] identi6ed insu>cient top management support as one of the greatest impediments to IT success. They further argued that competitive advantage through the strategic use of information systems “does not come from sophisticated IT; instead it comes from the skilled management of information technology assets, both tangible and intangible.” Given the evolution of IS into a key organizational resource, top management support for IS appears to emerge as a critical component in enhancing the role and functionality of IS in supporting business strategy. While top management support of IS has generally been identi6ed as a key parameter in the success of information systems, the nature of this impact needs to be analyzed in further detail in order to enhance our understanding of the phenomenon and draw useful implications for research and practice. Prior studies indicate that top management support a$ects IS e$orts indirectly through its impact on IS

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processes. For example, Weill [8] noted that for the same level of IS investment, strong top management commitment can lead to superior conversion e$ectiveness and thus improve IS performance. Bajwa et al. [9] found that high levels of top management support indirectly in7uence the success of executive information systems by creating a supportive context for the IS organization and vendors/consultant undertakings in a 6rm’s systems e$orts. A multi-case study by Wilson and McDonald [10] found top management support to be an important factor in the successful implementation of decision support systems. These and other studies, such as Raghunathan et al. [11] and Choe [12], o$er evidence of the impact of top management support on various organizational IS e$orts. Empirical studies involving top management support for IS, such as the ones cited above, are sparse. Further a conceptual model linking top management support to IS processes and to IS performance is not available in the literature. There is thus a lack of a framework for portraying the inherent relationships among these IS variables. The current research seeks to address this gap in the literature by proposing a framework for depicting the direct and indirect impact of top management support on IS performance. Empirical validation of the proposed framework is provided through structural equation modeling, based on responses from a survey. The results provide support for the direct and indirect relationships hypothesized in this research between top management support and IS performance. The remainder of this paper is organized as follows. The next section presents the research framework and develops the research hypotheses. This is followed by sections on research methodology (including data collection, operationalization of variables and data analysis), discussion of results, and conclusion. 2. The research framework and hypotheses The evolution of IS into a strategic organizational resource, with the ability to shape business strategy, has resulted in changes in the role of leadership, organizational structure, and IS management processes [11,13] as they relate to IS success. Recent literature has identi6ed the need for collaboration between top management and IS management in the development of IT infrastructure and management of IS processes. This is expected to facilitate the incorporation of IS into the fabric of business strategy [14]. For the proper alignment of IS and business management, organizations must rely on a directive from top management [15]. This level of top management support (TMS) has been recognized as a key factor in facilitating the synchronization of business strategy and information systems functional strategy [16]. The importance of top management support in the context of IS has been theorized in the literature since the early 1960s [17,18] and became more widespread throughout the 1970s

Top Management Support

Organizational Positioning of IS

IS Management Issues

IS Performance

Fig. 1. Two-tiered top management support framework.

[19,20] and 1980s [21–25]. More recent literature evidences the continuing recognition of the importance of TMS in relation to the IS function [7,9,10,14,26]. The importance of the topic and the lack of an underlying framework for grounding empirical validation have provided the motivation for this present research. Slevin and Pinto [27] broke down project implementation into two elements: strategic and tactical. Strategic refers to the process of establishing overall goals and of planning how to achieve those goals and tactical refers to using human, technical, and 6nancial resources to achieve strategic ends. They determined that top management support is part of the strategic element of project implementation. In an IS context, Applegate et al. [28] suggested that top management has two separate responsibilities in the context of its relationship to IS. The 6rst is the development and structuring of the IS function within the organization, similar to Slevin and Pinto’s [27] strategic element. After positioning the IS function in its appropriate place in terms of organizational goals and expectations for IS, the second responsibility of top management is to support IS management as they plan, control, and make decisions a$ecting the operation of the IS function. This suggests a two-tiered system of management support. This two-tiered conceptualization of the e$ect of top management support is depicted in the framework in Fig. 1. The framework portrays both the direct and the indirect e$ect of top management support on IS performance. The 6rst level, referred to as “Organizational Positioning of IS”, addresses broader IS issues in the overall organizational context. The second level, referred to as “IS Management Issues” focuses on speci6c IS issues such as IS applications and IS control. Top management support is relevant to both levels and, eventually, to the enhancement of IS performance through its impact on these two levels. This di$ers from the Slevin and Pinto’s [27] project implementation, with top management support as a driver and not part of the strategic or positioning component of project or IS implementation. With IS implementation, most of the project planning and positioning is completed at the IS functional level of organization. Therefore, most high level IS

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IS Management Issues

Future Portfolio

Current Portfolio Organizational Positioning of IS

Top Management Support

IS Performance

Structure

Integration

Control

Fig. 2. The TMS model.

decisions are not determined by top management, but may be driven by high level support. With top management support, and the availability of resources, the top-tiered framework is more viable for IS. 2.1. The TMS model The two-tiered conceptual framework described earlier and presented in Fig. 1 is developed into an operational model linking TMS to IS performance both directly and indirectly, through variables representing the “Organizational Positioning of IS” and “IS Management Issues” constructs. It has been noted that the purpose of building IT infrastructure is to support the commonality between di$erent systems, applications, and cross-functional integration [29]. All 6rms need a basic level of IT infrastructure capability to implement organizational transformation [30]. The IT infrastructure has been shown to be an important component of IT capability with signi6cant impact on 6rm performance [31]. Kayworth and Sambamurthy [32] noted that developing an IT infrastructure is important to ensure enterprise-wide integration of IT initiatives. The Organizational Positioning of IS construct captures the notion that IS has to be developed, structured, and positioned in a way that ensures 6t within an organizational context, and is well integrated with the organizational environment. Integration of systems throughout an organization and the development of a centralized/decentralized structure are e$orts that are used to achieve this type of positioning. Likewise, the IS Management Issues construct encompasses aspects of IS that need speci6c managerial attention for e>cient and e$ective func-

tioning of the organizational IS. The IS application systems portfolios, both current and future, as well as control over the functioning of IS are variables that are representative of these issues. 1 The TMS model presented in Fig. 2 depicts the direct and indirect relationships among the variables discussed above. The model shows the direct relationship between top management support and IS performance as well as top management’s indirect e$ect on IS performance through the intervening variables of structure, integration, control, and current and future portfolios. Underlying this model is the two-tiered framework of Fig. 1, with structure and integration in the 6rst tier, and the IS application portfolios (current and future) and control in the second tier. The variables in the model are those identi6ed in the IS literature as in7uencing various aspects of an organization’s IS and have been used in studies such as Tu et al. [33]. These variables and the hypothesized relationships among the variables are described below. Table 1 presents a listing of these variables and the literature basis for the hypotheses. 2.2. Top management support Top management support of information systems refers to the degree to which top management understands the importance of the IS function and the extent to which it is 1 It must be noted that the variables that are chosen to represent these constructs capture only a limited, although signi6cant part of those constructs. There is scope to expand on the conceptualization of these constructs in future research.

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Table 1 Literature review summary for IS variables IS characteristics

Relevant research

References

Top management support

Top management support leads to IS success Strong top management commitment

Doll [38]; Raghunathan and Raghunathan [39]; Choe [12]; Bajwa et al. [9] Weill [8]; Wilson and McDonald [10]

Structure of IS

Decentralized computing IS decentralization and IS performance Re-centralization

Cash et al. [44] Raghunathan et al. [58] Von Simson [45]; Applegate et al. [28]

Integration of IS

Strategic alignment

Chan and Hu$ [47]; Henderson and Venkatraman [51] Teo and King [53]

Integration of IS and business will lead to successful IS planning Current portfolio of IS

Development of measurement Strategic 6t of portfolios

Raghunathan et al. [71] Applegate et al. [69]

Future portfolio of IS

Development of measurement Strategic 6t of portfolios Strategic importance of future 6t of infrastructure

Raghunathan et al. [71] Applegate et al. [69] Weill et al. [14]

IS control

Modes of control User control leads to IS performance IS management control leads to IS performance

Kirsch [56] Cash et al. [44] Raghunathan et al. [58]; Kirsch [56]

involved in IS activities. Management comprises the senior leadership of an organization, which includes the CEO, CIO, COO, and other senior-level business executives [34]. Support from top management facilitates many of the operational and strategic IT management activities. These activities include negotiation, IS planning, project management, and similar tasks [35]. Pinto and Slevin [36] identi6ed 10 factors in project development and indicated the need for top management support at the project level. They indicated that the continuous involvement from top management is invaluable in resolving problems when crises and con7icts arise in an uncertain environment, which are also indicative of an IS environment. In a study of key information management issues, managers were asked to rank the issues a$ecting IS success [37]. Top management support was found to be the most signi6cant attribute, with improved communication, goal alignment, competitive advantage, and IS strategic planning as the next four ranked attributes. TMS has been conceptually linked to IS performance [12,38]. Raghunathan and Raghunathan [39] con6rmed the impact of top management support on successful IS planning. High levels of top management support have been found to indirectly in7uence IS success by creating a supportive context for the IS organization [9]. Similar evidence of the positive e$ect of strong top management commitment and support on systems performance is found in Weill [8] and Wilson and McDonald [10]. The literature thus suggests that a supportive top management provides the IS function

with an environment that promotes successful IS e$orts. It is therefore hypothesized that: H1. The higher the level of top management support, the higher the level of IS performance. 2.3. Structure of IS The structure of the IS function is primarily built around the extent of centralization/decentralization of the function. Centralization refers to the central control of organizational resources by the corporate o>ce [40]. The two extremes of structure include the centralized hub, where decisions are concentrated, and the federation hub, where strategic decisions are made at the plant or business unit level [41]. Centralization of IS decisions is de6ned as “the degree to which the authority to make IS decisions is located at the apex of the IS organization” [42]. With computing becoming less expensive and more powerful, organizations have moved away from a centralized structure (which is typically considered e>cient for a mainframe-computing environment) to a more decentralized structure [43]. However, decentralization has caused many problems within an organization, such as lack of standardization, control of data, and duplication of sta$, thereby increasing costs and complexity within the system [44]. Also, an added emphasis on sta$ professionalism, reduction in complexity and maintainability, corporate data management, and cost estimation

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and analysis [28], as well as integrating business functions, and the changing demographics of the information systems profession, has led to a re-centralization of the management of the IS function, and establishment of organization-wide standardization of software and hardware [45]. However, re-centralization only suggests a more centralized location for strategic and upper level operational decision-making; a decentralized concentration of IT capability may still continue to exist [42]. In such organization-wide e$orts re-centralization is typically e$ective when top management provides backing for those e$orts. In other words, where top management is more actively involved in supporting IS it is more likely that they will encourage the types of organization-wide re-centralization e$orts that are intended to enhance IT assimilation. This will lead to an ability to make strategic decisions for IS and to a more e>cient IS function. It is therefore hypothesized that:

operation and the portfolio of systems to be developed for the future. A 6rm’s information technology portfolio has been de6ned in terms of its total investment in computing and communication technology and includes hardware, software, telecommunications, electronically stored data, devices to collect and represent that data, and the people who provide IT services [35]. The need for involvement and support from top management is evident and has been shown to be a key indicator of the strategic importance of the existing portfolio of systems [54]. Top management support is thus perceived to enhance the signi6cance to the organization of the current portfolio of IS applications. It is therefore hypothesized that:

H2. The higher the level of top management support, the higher the level of centralization of IS structure.

Further, recent evidence shows that re-centralization of IS can help cut computing costs, attract 6rst-rate IS professionals, improve system reliability, etc. [33]. These are the very elements that organizations with a strategically signi6cant, currently operational portfolio of IS applications need, to enhance their systems capabilities. It is therefore hypothesized that:

2.4. Integration of IS For business and IS managers to work collaboratively to develop the IS function, a high level of integration between di$erent business units and IS is necessary [15]. IS integration refers to how well IS activities are integrated with organizational and functional activities, such as marketing, manufacturing, human resources, etc. The extent of strategic alignment between business and IS is a measure of the integration of IS [46–50]. These activities may include cross-functional problem-solving, strategic planning, and data sharing. A model of strategic alignment between IS and business has included two dimensions of integration: functional and strategic [51]. Functional integration refers to the 6t between internal activities of IS and a business unit, and strategic integration emphasizes the 6t between external strategies and the internal IS function. These two types of integration have been considered essential to IS success [52]. The integration of IS planning and business planning has also been argued as essential to IS success [53]. Integration requires cooperation and communication between IS and other organizational units. Support from top management for IS is a clear signal to organizational units that such cooperation is expected from them; this provides motivation for all the units to work together to facilitate integration. It is therefore hypothesized that: H3. The higher the level of top management support, the higher the level of integration of IS. 2.5. Current and future portfolio of IS Cash et al. [44] have proposed that the strategic signi6cance of an organization’s IS function can be captured by the portfolio of systems applications that are currently in

H4. The higher the level of top management support, the higher the level of importance of the current portfolio of IS.

H5. The higher the level of centralization of structure of IS, the higher the level of value of the current portfolio of IS. Campion et al. [55] found that task signi6cance could greatly improve work group e$ectiveness. It follows from this that IS e$ectiveness would be positively in7uenced when IS personnel recognize that the IS function is important to the organization. The importance of the IS function, in turn, is indicated by the strategic signi6cance and importance of the current portfolio of systems applications. It is therefore hypothesized that: H6. The higher the level of importance of current portfolio of IS, the higher the level of IS performance. The signi6cance of the current portfolio of IS applications represents one aspect of the organizational importance of the IS function. A second and equally vital indicator of IS importance is the portfolio of IS applications that have implications for the future [44,54]. The future portfolio of IS includes use of new technologies that will improve the future operation and coordination of the IS function. Some key planning implications include the ability to reduce future costs, enhancements of existing technology, incorporation of new technologies, and the strategic use of future technology for a competitive advantage. The involvement of top management is key to the strategic success of these aspects of future systems [33]. These relationships follow a

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pattern very similar to those presented in the context of the current portfolio of IS. It is therefore hypothesized that: H7. The higher the level of top management support, the higher the level of importance of the future portfolio of IS. H8. The higher the level of importance of the future portfolio of IS, the higher the level of IS performance. 2.6. Control of IS IS control is de6ned as the degree to which the IS function has authority over IS-related decisions. There are several formal modes and mechanisms of control including behavior, outcome, clan, and self [56]. A formal mode of control can lead to desired outcomes including IS control, if management is able to adhere to the rules and procedures that have been articulated. In determining formal control mechanisms, IS managers must weigh the risk involved as well as the cost of the control system and its expected bene6ts [57]. IS executives who are unable to exercise any degree of control over IS activities and decisions are likely to feel a sense of frustration and reduced importance and power. This can lead to IS executives perceiving the IS function to be less signi6cant and in7uential within the organization. Such perceptions are likely to promote a sense of alienation that can negatively a$ect the level of IS performance. IS management control has been found to be a critical success factor for IS organizations [56,58]. The level of control that the IS function perceives to have is directly related to the autonomy and authority that is given by top management through its support and interest in the IS function. Based on the above, it is hypothesized that: H9. The higher the level of top management support, the higher the level of control of IS. H10. The higher the level of control of IS, the higher the level of IS performance. A centralized IS structure has been referred to as the extent to which an organization’s computing facilities and activities are centrally organized and managed. Centralization includes consolidation of data centers, bee6ng up the authority of the IS functional sta$, and establishing company-wide technical standard and work procedures [45]. This suggests the vesting of a greater degree of control over IS activities and decisions within the IS function. In the same vein, the higher the degree of IS integration, the greater is the scope for IS management to maintain its in7uence over issues such as standardization and control over systems, data, etc. It is therefore hypothesized that: H11. The higher the level of structure of IS, the higher the level of control of IS. H12. The higher the level of integration of IS, the higher the level of control of IS.

The TMS model depicted in Fig. 2 and discussed earlier is updated to include the 12 stated hypotheses and is presented as Fig. 3. The next section describes the research methodology. 3. Research methodology 3.1. Data collection A self-administered questionnaire was mailed to 800 IS executives, who were selected at random from a list of 3000 potential respondents. The list was obtained from a directory of top IS executives in more than 10,000 organizations in the US. The list covered all types of industries, sizes, and geographic locations. From the 800 questionnaires that were mailed, 237 responses were obtained of which 231 were complete and usable. This resulted in a 28.9% response rate. Eighty-6ve percent of the sample comprised 6rms that had sales of more than $50 million (see Table 2). The industries that were part of the sample included primarily manufacturing and 6nance/insurance (see Table 3). This information is relevant while generalizing the results of this study. Table 2 Company sales (Million of $) Annual sales

Number of % of respondents respondents

Less than $100 million 51 $100 to less than $250 million 33 $250 million to less than $500 million 25 $500 million to less than $1 billion 43 $1 billion and above 57 Others (sales was not indicated) 22 TOTAL 231

22.1 14.2 10.8 18.6 24.6 9.7 100

Table 3 Industries represented in the sample Industry type

Number of respondents

% of respondents

Business services Finance/insurance Government Manufacturing Medicine/law/education Petroleum Public utility Transportation Wholesale/retail Others TOTAL

7 52 3 86 10 5 12 10 22 24 231

3.0 22.5 0.8 37.2 4.3 2.1 5.2 4.3 9.5 10.1 100

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IS Management Issues

Future Portfolio

H8

Current Portfolio

H6

H7 H4

Organizational Positioning of IS

Top Management Support

IS Performance

H5 Structure H2 H1 H3

Integration

H9

H12

H11

Control

H10

Fig. 3. TMS model with hypotheses.

3.2. Measurement items

3.3. Data analysis

The variables used in the questionnaire were measured on a 5-point Likert scale ranging from “strongly disagree” to “strongly agree”. Negatively worded questions were reverse-scored. The means of the items comprising a construct were used as the value for that construct. A list of the questionnaire items is provided in Appendix A. Prior to mailing the questionnaire, a draft was reviewed by two IS researchers for relevance and appropriateness of the items. Two practitioners then completed the survey to review it for clarity of the items; modi6cations were made to the 6nal questionnaire based on their comments and the 6nal questionnaire was mailed out. Data from the respondents were compiled and con6rmatory factor analysis was used to identify the variables proposed in this study. All items had factor loadings above 0.5. The reliability values for each variable were calculated using Cronbach’s alpha, with all results above 0.8, which is well above the recommended minimum value of 0.7 [59]. Although factor analysis provides evidence of convergent validity among the items in a factor and discriminant validity across factors, the methodology assumes that there is no correlation among error terms and does not speci6cally check for correlation. But, in a measurement model using a Linear Structural Relationships (LISREL) statistical software package [60], this can be speci6cally checked, thus providing good evidence of convergent validity. For this reason, each observed variable was tested for validity and 6t using LISREL estimates (see Appendix A). The analysis indicated that the items used for each construct showed unidimensionality through high levels of validity, reliability, and model 6t.

Path analysis was used to test the relationships between the variables as proposed in the model (Fig. 3). Path analysis is a model with a unidirectional causal 7ow which assumes that each of the conceptual variables is assessed without error by a single measure [61]. This can be used only if each construct indicates unidimensionality [62], and is helpful in conceptualizing a theoretical model. All relationships for this model (Fig. 2) were hypothesized to be positive. The results are presented in Table 4. Eleven of the 12 hypotheses are shown to be supported. The only hypothesis that is not supported is Hypothesis 12 linking integration of IS to control of IS. Results indicate that top management support has a signi6cant direct relationship with structure, integration, current & future portfolios, and control (H2, H3, H4, H7, and H9) as well as with IS performance (H1). Further, top management support has a signi6cant indirect relationship with IS performance through IS structure, IS control, current portfolio, and future portfolio (H11, H10, H5, H6, and H8). Thus the results for the individual paths support the overall concept of the model, that is top management support has a signi6cant impact on IS performance 2 both directly and indirectly. 2 Since measuring IS performance through an IS manager can be biased, the performance measures were printed on a separate questionnaire and was sent with the original questionnaire. The IS manager was requested to give this questionnaire to a top manager in his/her organization and request that person to respond directly to us in postage paid envelop supplied with the questionnaire. There were 63 matching responses. Pair wise T -test was conducted to see whether there was any di$erence between top management responses and IS manager responses. The results showed no signi6cant di$erence.

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Table 4 Results of path analysis Hypothesis

Variable

Predictor variable

Relationship

Path coe>cient

t-value (p-value)

H1

Top management

IS performance

Positive

0.13

H2

Top management

Structure of IS

Positive

0.32

H3

Top management

Integration of IS

Positive

0.57

H4

Top management

Current portfolio

Positive

0.20

H5

Structure of IS

Current portfolio

Positive

0.14

H6

Current portfolio

IS performance

Positive

0.21

H7

Top management

Future portfolio

Positive

0.17

H8

Future portfolio

IS performance

Positive

0.17

H9

Top management

Control of IS

Positive

0.29

H10

Control of IS

IS performance

Positive

0.31

H11

Structure of IS

Control of IS

Positive

0.12

H12

Integration of IS

Control of IS

Positive

0.01

2:72∗ (0.023608) 4:13∗∗ (0.002559) 10:49∗∗ (0.00000) 4:98∗∗ (0.000759) 4:26∗∗ (0.00211) 3:88∗∗ (0.00373) 4:87∗∗ (0.00088) 2:32∗ (0.04549) 4:07∗∗ (0.0028) 6:76∗∗ (0.00008) 2:45∗ (0.03676) 0:19NS (0.85353)

Note: NS = Not signi6cant;

∗∗ =signi6cant

p-value¡0.01; ∗ =signi6cant p-value¡0.05.

There is no single statistical test that best describes the overall 6t or strength of a model’s predictive power. However, several measures of 6t may be used to test for goodness of 6t [61]. In LISREL models [63], these measures are divided into three categories: measures of absolute 6t, measures of incremental 6t, and measures of parsimonious 6t [64] (Fig. 4). The Goodness-of-Fit Index (GFI) and Root Mean Square Residual (RMSR) are measures of absolute 6t. GFI is a non-statistical measure ranging from 0 (very poor 6t) to 1 (perfect 6t) that represents the overall 6t without being adjusted for degrees of freedom. RMSR is the square root of the mean squared di$erence between elements of the predicted and observed matrices [61]. Models with a score below 0.10 are considered to have a good 6t [65]. The Normed Fit Index (NFI) and Comparative Fit Index (CFI) are used to test for incremental 6t. Incremental 6t involves comparing the proposed model to a baseline model [66]. Values for NFI and CFI that are greater than 0.90 are considered to be good indicators of model 6t. Parsimonious 6t measure relates the Goodness-of-Fit model to the number of estimated coe>cients required to achieve this level of 6t. Adjusted Goodness-of-Fit Index (AGFI), which is an extension of GFI, is used to test for

this. AGFI adjusts for the degrees of freedom for the null model, and a value greater than 0.90 is evidence of good model 6t [64]. The model proposed in this research has the following 6t coe>cients: GFI of 0.96, RMSR of 0.020, NFI of 0.90, CFI of 0.92, and AGFI of 0.88. All of these measures indicate a fairly reasonable model 6t. However, the di$erence between GFI and AGFI appeared to be high, indicating the possibility that one of the paths might not have been speci6ed. An examination of the modi6cation indices suggested the possibility of a path between the current portfolio and the future portfolio. Con6rmatory factor analysis permits the researcher to conduct tests for alternative model 6ts whenever a theoretical justi6cation is feasible. Since the current and future portfolios represent aspects of how an organization plans to use its information systems, the possibility of a link between the two within the framework of an alternative model appears reasonable. For example, it is improbable that an organization is shaping a future portfolio without reference to the existing IS applications. Based on the rationale that the current portfolio can have an impact on the future, an alternative model was proposed in which a path was added from the current portfolio to the future portfolio; the non-signi6cant

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IS Management Issues Future Portfolio

0.17*

0.17** 0.20**

Current Portfolio

0.21**

Organizational Positioning of IS Top Management Support

IS Performance

0.14** Structure 0.32** 0.13* 0.57**

Integration

0.01NS

0.12*

0.29**

Control

0.31**

χ2 = 31.68 df = 9 CFI = 0.92 GFI = 0.96 AGFI = 0.88 RMSR = 0.020 Note: NS = Not significant ** = significant p-value < 0.01 * = significant p-value < 0.05 Fig. 4. Hypothesized TMS model with LISREL path coe>cients.

IS Management Issues

Future Portfolio

0.17*

0.10** 0.30** 0.20**

Current Portfolio

0.21**

Organizational Positioning of IS

Top Management Support

IS Performance

0.14** Structure

0.32**

0.13* 0.57**

Integration

0.28**

0.12*

Control

0.31**

χ2 = 8.76 df = 9 CFI = 1.00 GFI = 0.99 AGFI = 0.97 RMR = 0.0014 Note: ** = significant p-value < 0.01 * = significant p-value < 0.05 Fig. 5. Final TMS model with LISREL path coe>cients.

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path from integration of IS to control of IS was removed. The 6t coe>cients for this alternative model are: GFI of 0.99, RMSR of 0.014, NFI of 0.97, CFI of 1.00, and an AGFI of 0.97. These indices are much higher than the indices of the prior model indicating an excellent 6t of the model to the data. All the path coe>cients in this new model are signi6cant and all the model 6t indices are much higher than the suggested norms. This new model is presented as the 6nal TMS model in Fig. 5. 4. Discussion The strategic role of IS has been an important aspect of business strategy [67]. No longer can organizations rely on their IS infrastructure alone to give them an advantage over their competitors without strategically positioning themselves in a way that makes them more e>cient and more 7exible in responding to change [68]. Top management support of organizational positioning and of management issues plays a critical part in enabling the organization to respond dynamically to environmental changes. The results of the path analysis indicate that top management support does have a signi6cant impact on the IS function in an organization. The two-tiered framework of top management support of IS shows adequate 6t through LISREL. A signi6cant aspect of the result is the clear evidence of support for the directional 7ow of the impact from top management support to IT infrastructure components to IS management issues and then to IS performance. This result is signi6cant in that it validates the body of literature [14,29– 32,34] that has consistently highlighted the importance of a “basic level of IT infrastructure capability” for e$ective assimilation of IT into organizational strategy. By inference, even the most sophisticated portfolios of systems applications cannot reach their full potential in terms of providing critical organizational support if basic elements of the infrastructure are not positioned appropriately. This research is limited in the choice of operational variables to represent these constructs. The signi6cance of this study, however, indicates that a more elaborate operationalization of these constructs is warranted through future research. The individual IS functional variables such as IS control are shown to have a signi6cant e$ect on IS performance. Top management support, through these IS variables, plays an added and signi6cant role in the success of IS. Further, while everyday management issues of people, tasks, and environment lie within the domain of the functional IS manager [69], the support of top management and its involvement in substantive issues that shape the course and direction of IS, such as the IS applications portfolios, are shown to be of signi6cant bene6t to IS success. An interesting result that appears to have signi6cance for future research is the link between the current and future portfolios of IS applications. McFarlan and McKenney [70] conceptualized a strategic grid that was based on

the levels of current and future portfolios. This oft-quoted and well-known framework identi6es four di$erent IT environments. The grid is based on the strategic signi6cance (high vs. low) to the organization of (1) the current portfolio and (2) the future portfolio. The combination of current/future portfolio with high/low strategic impact presents four types of IT environments and is represented by the four cells (strategic, turnaround, factory, and support cells) of the strategic grid. The support cell represents a low current and future portfolio, factory represents a high current portfolio and a low future portfolio, turnaround represents a low current portfolio and a high future portfolio, and strategic represents a high current and future portfolio. An organization may be placed anywhere on a continuum ranging from low to high impact. McFarlan and McKenney [70] proposed that understanding an organization’s position along these continuums is critical to developing appropriate IT strategies. In reference to the rationale underlying the strategic grid framework as outlined above, the present study did not hypothesize a relationship between the current and future portfolios in the model depicted in Fig. 3 of this paper. However, the path coe>cient from the structural model depicted in Fig. 5 indicates a signi6cant path from the current portfolio to the future portfolio. This is an interesting result for which one possible intuitive reasoning could be that the original framework proposed in the early 1980s may re7ect the IT environment of those times. Since then, IT has grown dramatically in its importance as a key organizational resource for practically every type of organization. Given that the grid framework has occupied an important position in the IS literature, it should be a very useful, interesting, and signi6cant contribution to this literature to explore this issue further to evaluate whether the grid framework requires appropriate modi6cations to re7ect today’s IT environments. From a practical standpoint, the indicated relationship between the current and future portfolios may be very relevant to organizations that are devoting a substantial amount time and e$ort into the design and development of their future IS systems. It appears that organizations can bene6t from evaluating the strengths, weaknesses, and impact of their existing and currently operational portfolios of systems applications, and use this knowledge as a springboard as they initiate new developmental e$orts. 5. Conclusion The support of top management has been identi6ed as a critical factor to the success of key organizational activities. This paper establishes a framework for understanding the impact of support from top management on the IS function. Speci6cally, the impact on several critical IS variables, and on IS performance, was studied, using a conceptual model. Empirical testing of the model relationships and model 6t was conducted using structural equation modeling. The results provide strong support for the model.

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469

Appendix A. Questionnaire items and factor loadings (Table 5) Table 5 IS performance IS1 IS2 IS3 IS4 IS5 Top management support MS1 MS2 MS3 MS4 MS5 MS6 MS7 Structure of IS CS1 CS2 CS3 Integration of IS IN1 IN2 IN3 IN4 Current portfolio of IS PP1 PP2 PP4 PP5 PP6 PP7 PP8 Future portfolio of IS FP1 FP2 FP3 FP4 FP5 FP6 FP7 FP8 FP9

IS is perceived as facilitating organizational decision-making The user community is generally satis6ed with IS The IS function has not achieved its performance goals (Reversed) Use of IS has led to better management of organizational activities Bene6ts of IS have outweighed costs

0.733 0.770 0.737 0.715 0.780

Top management Top management Top management Top management Top management Top management Top management with IS

0.787 0.768 0.807 0.813 0.787 0.669 0.720

involvement with IS function is strong is interested in IS function understands the importance of IS supports the IS function considers IS as a strategic resource understands IS opportunities keeps the pressure on operating units to work

NFI=0.990 CFI=0.998 = 0:8603

NFI=0.980 CFI=0.983 = 0:9132

Management of the IS function is centralized Data processing in our organization is centralized Database control in our organization is centralized

0.824 0.887 0.769

NFI=0.995 CFI=0.996 = 0:8648

Senior people are transferred between IS and organizational line functions Joint task forces evaluate the strategic potential of IS IS planning is integrated with overall organizational (strategic long-term) business planning or Speci6c executives are charged with expanding IS capability to support the organizational strategic e$ort

0.592 0.691 0.805

NFI=0.991 CFI=0.991

0.799

= 0:8180

IS is used to o$er signi6cant new features to the existing product lines IS is not vital to our organization IS breakdown for extended periods will a$ect out organizational activities severely Our company relies heavily on IS for e>cient operation IS breakdown will critically a$ect one or more of our functional departments IS breakdown will a$ect our database access IS breakdown will a$ect overall coordination within our organization

0.465 0.625 0.775

Projects involving applications of new technologies Projects involving development of new areas of application Projects involving cost displacement or cost reduction Projects whose primarily bene6t is providing new decision support information to middle and lower levels of management Projects whose primarily bene6t is providing new decision support information to middle and lower levels of management Projects which will allow the company to develop and o$er new products or services for sale (includiug signi6cant new features to existing product lines) Projects which enable development of new administrative control and planning processes Projects which o$er signi6cant tangible bene6ts through improved operational e>ciencies (e.g. reducing inventory) Projects which appear to o$er new ways for the company to compete (e.g. fast delivery)

0.740 0.740 0.880 0.810

0.730 0.767

NFI=0.993 CFI=0.996 = 0:8535

0.781 0.626

0.830 0.750 0.780 0.780 0.870

NFI=0.960 CFI=0.980 = 0:8555

470

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Table 5 (continued) Control of IS CN1 CN2 CN3 CN4 CN5

IS feels it is losing control over IS activities to users There is unplanned growth in the number of new systems and supporting sta$ to meet user demand IS support services are delivered to users by multiple suppliers without coordination There is a lack of standardization and control over data hygiene There is a lack of standardization and control over systems

0.502 0.539 0.769 0.857 0.827

NFI=0.991 CFI=0.993 = 0:8397

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