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Effect of Dynamic Information Technology Capabilities on Organizational Performance of Deposits Money Banks in Nigeria Kabiru Jinjiri Ringim Department of Management Teknologi, School of Business, Universiti Teknologi Brunei. Darussalam [email protected]; [email protected], Tel: 673-8323566 Mohammed Aliyu Dantsoho Department of Business Administration, Faculty of Administrations, Ahmadu Bello University Zaria, Nigeria [email protected] , Tel: 234-8038304040 Hanmaikyur Tyoapine John Federal University of Agriculture, Makurdi, Nigeria. [email protected] ; Tel: +2347031059281 Abstract - The objective of this paper to examined the effects of Dynamic Information Technology Capabilities (DITCs) on organizational performance using data from the Nigerian banking sector. The DITC dimensions include Information Technology (I.T) Knowledge, IT Management, IT Personnel Expertise and IT Infrastructures.Cross-sectional survey research design was used in the study. Population of the study consists of 191 employees of deposit money banks and 155 employees’ were drawn as sample size for the study. The sample size was selected using simple random technique. Data was collected by means of hand delivery using Research Assistant from the employees at management cadre representing the respective banks in the study. The data was processed using Statistical Package of Social Science (SPSS). Regression analysis was conducted to test the hypothesis and determine the best DITC predictor’s in the relationship between DITC and organizational performance of DMB in Nigeria. Also, factor analysis was done to reduce the dimensionality of a data set in which there are a large number of interrelated variables, while retaining as much as possible of the variation present in the data set. The result reveals that there is significant positive relationship between DITCs and organizational performance in terms of marketing and financial performance However, this relationship is higher in terms of IT infrastructure flexibility fallowed by IT personnel expertise, then IT management capability and lastly IT knowledge creation. The outcome of this study provides important insights to both managers and researchers for further understanding on the effects of DITCs factors on organisational performance. It is therefore recommended that, mangers should pay attention on building, re-configuring, renewal and deploying of DITCs so as to deal with environmental changes effectively. Keywords: Dynamic Information Technology Capabilities, Deposits Money Banks, Organisational Performance, Nigeria. MAYFEB Journal of Business and Management-ISSN 2371-7742 Vol 1 (2017) - Pages 6-15 6
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Page 1: Effect of Dynamic Information Technology Capabilities on ...

Effect of Dynamic Information Technology Capabilities on Organizational Performance of

Deposits Money Banks in Nigeria

Kabiru Jinjiri Ringim Department of Management Teknologi,

School of Business, Universiti Teknologi Brunei. Darussalam [email protected]; [email protected], Tel: 673-8323566

Mohammed Aliyu Dantsoho

Department of Business Administration, Faculty of Administrations, Ahmadu Bello University Zaria, Nigeria

[email protected] , Tel: 234-8038304040

Hanmaikyur Tyoapine John Federal University of Agriculture, Makurdi, Nigeria.

[email protected] ; Tel: +2347031059281

Abstract - The objective of this paper to examined the effects of Dynamic Information Technology Capabilities (DITCs) on organizational performance using data from the Nigerian banking sector. The DITC dimensions include Information Technology (I.T) Knowledge, IT Management, IT Personnel Expertise and IT Infrastructures.Cross-sectional survey research design was used in the study. Population of the study consists of 191 employees of deposit money banks and 155 employees’ were drawn as sample size for the study. The sample size was selected using simple random technique. Data was collected by means of hand delivery using Research Assistant from the employees at management cadre representing the respective banks in the study. The data was processed using Statistical Package of Social Science (SPSS). Regression analysis was conducted to test the hypothesis and determine the best DITC predictor’s in the relationship between DITC and organizational performance of DMB in Nigeria. Also, factor analysis was done to reduce the dimensionality of a data set in which there are a large number of interrelated variables, while retaining as much as possible of the variation present in the data set. The result reveals that there is significant positive relationship between DITCs and organizational performance in terms of marketing and financial performance However, this relationship is higher in terms of IT infrastructure flexibility fallowed by IT personnel expertise, then IT management capability and lastly IT knowledge creation. The outcome of this study provides important insights to both managers and researchers for further understanding on the effects of DITCs factors on organisational performance. It is therefore recommended that, mangers should pay attention on building, re-configuring, renewal and deploying of DITCs so as to deal with environmental changes effectively.

Keywords: Dynamic Information Technology Capabilities, Deposits Money Banks, Organisational Performance, Nigeria.

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I. INTRODUCTION

Studies that relate IT capabilities to organisational performance based on Resource Based View (RBV) theory

assumed that firms possess bundles of resources, and those are heterogeneously distributed across firms, and that

heterogeneity persisted over time [35]. However, the concept of capability infers that, simply because, a capability

may have reached some level of reliability does not entails that such capability has reached the highest possible level

of functionality. Past study distinguished between three types of IT capabilities in the terms of value, heterogeneity,

and imperfect mobility, and argued that one type could not be a source of sustained competitive advantage [2].

According to these authors the first two types are necessary conditions for achieving competitive advantage, whereas,

the latter (imperfect mobility) is necessary for sustained competitive advantage. The second category is the Dynamic

IT Capabilities (DITCs). This capability in question refers to firm’s ability to excel in area of doing business through

use of information technology [10]. DITC is defined as the firm’s ability to integrate, build, and reconfigure IT-based

resources and competences to adjust to rapidly changing business environments [46]. In this study, IT knowledge

creation, IT Management capability, IT Personal expertise, and IT infrastructure flexibility are the combined DITCs

constructs [12].

At the same time, before deregulation of the financial sector, first generation banks dictated the pace of products

and services offer in Nigeria [33; 34]. But with advent of internet and other e-banking services those banks could no

longer decides in the market.The industry is now characterises as very dynamic due to rapid technological

advancements, customer sophistications and changing regulations [31]. As a result, banks must carefully select, build

and deploy resources and capabilities capable of dealing with those unprecedented changes. The organisations with

strong Dynamic Capabilities (DC) are intensely entrepreneurial [43]. They do not only adapt to business

environments; they do shape them through innovation, collaboration, learning, and involvement which set to increase

performance.

Although several studies supported the impact of DITC on organizational performance [2]; [46] but the mechanism

to which DITC affect firm performance has not been unresolved [45]. There is still argument on whether DITC

directly relate to organizational performance. While, some few studies discovered positive but weak relationship

between dynamic capability and organizational performance [40]. Others studies reported that DCs are antecedent to

functional competencies hence, there is no significant relationship between DCs and organizational performance in

Nigeria [30]. Therefore, the communality of DCs effect on performance has not been identified in previous studies

[45]. This paper seeks to examine the effect of DTCs on organizational performance of banks in Nigeria. Thus the

study will determine to what extent does Dynamic IT Capabilities (IT Knowledge, IT Management, IT Personnel

Expertise and IT Infrastructures.) affect organizational performance?

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II. LITERATURE REVIEW

The study that examined linkage between IT capability and organizational performance found that a firm that

developed and adopts IT capability benefits better than competitors in terms of profit and lower cost ratios. She

further claimed that every IT leader (firm) contain IT infrastructure, but either includes IT human resources or IT

enabled intangibles. This clearly indicates the need for DITC so as to sustain performance over time [16].

The need to match organizational performance to dynamic IT capabilities was also illustrated by the finding of [40]

when they argued that in addition to prior investments, firms are still need to make a much larger investments before

they fully benefits from IT. Studies that relate IT capabilities to organizational performance based on Resource Based

View (RBV) theory assumed that firms possess bundles of resources, and those are heterogeneously distributed

across firms, and that heterogeneity persisted over time [35]; [16]; [2]. The usefulness of RBV theory in IT research

but equally recognized it limitations indicating that, RBV neglects the influence of market dynamism, which could

erode existing capabilities [44]. When market situation changed. Researchers have extended RBV to dynamic

capabilities (DC) theory [43]. This is in line with claim that DC will help to explain the mechanisms by which

organizational resources contribute to sustain firm performance [15]. The main advantage of DITC over RBV theory

is that the DC theory focuses more on the issue of competitive survival rather than achievement of sustainable

competitive advantage. This approach appears to be closer to current business realities in the Nigerian banking sector.

For instance, the interconnectivity and integration of global financial markets and its subsequent effects on global

competition as well as the ever changing customers’ preferences on internet and other e-banking services make

Dynamic Information Technology Capabilities (DITC) an integral part of daily banking operations in Nigeria

Building on that, this study proposed that IT knowledge Creation (ITKC), IT personal expertise (ITPE), IT

management capabilities (ITMC), and IT infrastructure flexibility (ITIF) are the DITC constructs. These variables are

the most cited and operationalized among the higher order IT capabilities in previous studies [6]; [2]; [21]; [34]. For

example, [21] considered ITIF as the highest IT capability. [2] considered ITMC and ITPE (or IT business

experience) as Dynamic. [21] posited that IT personal expertise, IT management capabilities, and IT infrastructure

flexibility (though) distinct but related in affecting organizational performance. ITKC is perhaps the most strategic

assets of modern organizations. This is because, ability to improve performance would largely depend on the

knowledge that organization possessed and utilized in response to market changes. It is operationalized as the

organization’s ability to gathered knowledge from the environment it operates through the use of IT resources. ITMC

is operationalized as the ability of a firm’s IT staff and management to possessed and administer IT resources and

transform them for the creation of business value for organization sustainability. It is noticeable in the areas of

planning, investment, decision making and controlling. ITPE refers to fundamental skills and business experience

that IT staff possesses in the organization. That helps him develop reliable and cost-effective systems and anticipate

business needs sooner than the competitors. ITIF refers to ability of IT infrastructure to adapt to both incremental and

revolutionary changes in the business or business process with minimal penalty to current time, effort, cost, or

performance.

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MAYFEB Journal of Business and Management-ISSN 2371-7742 Vol 1 (2017) - Pages 6-15

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IV. UNDERPINNING THEORIES

In this research, RBV theory and DC theory were employed to underpin the study. RBV theory emphasized the

importance of selecting and acquisition appropriate resources to improve performance [4]; [5]. However, RVB

neglects the influence of market dynamic in rapidly changing business environment [44]. DC theory was thus

employed to bridge the gap between resources acquisition, configuration and renewal in response to market changes

[42]; [17]. This is because, changing the entire resources based is practically impossible. But, ignoring external

changes all together invites failure. Therefore both RBV theory and DC theory can be employed to explain the

mechanisms to which resources and capabilities influence organizational performance over time. As RBV approach

is critical in improving organisational performance, it is not sufficed to sustain performance in banks operating in

unstable environment. To sustain performance, banks must be able to build, reconfigure, renew and deploy resources

and capabilities in response to market changes.

V. METHODOLOGY

Cross sectional survey research design was employed to collect data at a particular point on time. The Population of

the study consists of 191 employees of deposit money banks and 155 employees’ were drawn as sample size for the

study using formula developed for computing for computing small and large sample size [13]. The sample size was

selected using simple random technique. 169 questionnaires were administered to the targets respondents with help of

research assistance and 157 responses were found useful in the final data analysis. Target respondents consist of bank

managers, IT and other staff at management cadre.

Data was processed using Statistical Package of Social Science (SPSS). Descriptive and inferential statistics were

used to analyses the data collected for the study. Factor analysis was conducted to reduce the dimensionality of the

data set. Multiple regression analysis was used to test the hypothesis formulated for the study. Prior to Factor analysis

the suitability of the data set was assessed using Kaiser-Meyer-Olkin (KMO) overall measured of sampling adequacy

(MSA) which was 0.565 the accepted level of 0.50. Bartlett’s Test of Sphericity was also significant (P.000). This

indicates the adequacy of the sample size for factorability.

The instrument used in this study was adapted from the previous study [6]; [32]. It was therefore subjected to

reliability and validity tests to ensure error free and validity of the instrument. Cronbach alpha coefficients were used

to assess the internal consistencies of the instrument as suggested by [18]. The result produced value ranging from

.809 to .859 which is above the benchmark of .60, with .70 and above as a good reliability [41]; [18].Therefore, all

the items in the measures possessed a good reliability and can be consistent over time.

The data was collected (by means of hand delivery) from the bank managers, I.T and other staff at management

cadre representing the respective banks in the study. After collecting the questionnaires the researchers also key in

the data in SSPS software to scientifically check whether any missing data exists. These strategies help to reduce the

number of unattended questions and to confirm whether any missing data exists. Results of factor analysis helped to

explain a total variance of 49.70%, and 77.421% of dependent and independent variables respectively. Prior to

regression analysis the normality of the data set, linearity, multicollinearity, homoscedasticity and error term were

checked as suggested by the scholars [18]; [36]. Thus assumptions for multiple regressions were met.

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VI. RESULT AND DISCUSSIONS

Multiple regression analysis was conducted whether DITC directly affect organisational performance and the result

reveals R=.598, R2= .271 and adjusted R2= .254. The F=15.567 with p value .000. The R2 of 271 implies that DITCs

explains a variation of up to 27.1% on the dependent variable. A changed in adjusted R2 of less than 2% indicates

that if the model is applied to another set of data it can give similar result. This also indicates a good cross validity of

the model. The F statistic of 15.567 shows the model fitness and also reveals that, the relationship between DITC

constructs and organisational performance is linear and significant. The contribution of each independent variable on

organisational performance is shown in Table 4.1a, b & c.

Table 4.1a: Model Summaryb

Model R R Square Adjusted R Square Std. Error of the

Estimate

Durbin-Watson

1 .598a .271 .254 .30799 1.687

a. Predictors: (Constant), IT Knowledge, IT Personnel ,IT infrastructure, , ITManagementa

b. Dependent Variable: Organ Performance

Table 4.1b: ANOVAa

Model Sum of

Squares

Df Mean Square F Sig.

1

Regression 6.550 4 1.637 15.572 .000b

Residual 11.762 124 .095

Total 18.312 128

a. Dependent Variable: Organisational performance

b. Predictors: (Constant), ITKnowledge, IT Personnel ,IT infrastructure, , ITManagementa,

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TABLE 4.1c: Regression Result Dynamic Information Technology Capability and Organisational Performance

Model Unstandardized Coefficients Standardized

Coefficients

T Sig.

B Std. Error Beta

1

(Constant) 4.862 .758 6.416 .000

IT Knowledge creation -.176 .082 -.194 -2.148 .034

IT Infrastructure

Flexibility .275 .081 .300 3.387 .001

IT Personnel Expertise .144 .052 .248 2.767 .007

IT Management capability .117 .049 .215 2.393 .018

Dependent variable: Organizational performance

From the Table 4.1c, it is clear that all the independent variables are significantly related to organizational

performance. However, IT infrastructure flexibility is the highest contributing variable (p.001), fallowed by IT

personnel expertise (p.007), IT management capability (p.018), and IT knowledge creation (p.034). Therefore, null

hypotheses 1, 2, 3 and 4 were rejected.

The objective of this study was to examine whether DITCs are directly related to organizational performance. The

finding of this study was therefore consistent with that of few studies that established significant and positive

relationship between DCs and organizational performance of bank [20]; [31]; [14]. [6] Have found a positive

relationship between IT infrastructure flexibility and organizational performance. [1] discovered that IT management

capability accounts for variation in customer service performance improvement in Nigerian insurance sector.

However, the outcome of this study contradicted the findings of [30] that established a non-significant positive

relationship between DCs and organizational performance of banks in Nigeria. Nevertheless, [10] revealed a positive

relationship between ITMC, ITIF and ITPE and organizational performance in Nigeria and also established the

mediating effect of process improvement on the relationship between DITCs and organizational performance in

Kaduna state [12].

As regards to managerial implications, the finding suggested that each of the four DITC constructs plays a

significant role in long-term organizational performance and therefore critical to managerial decisions on IT. As can

be seen there is need for continuous building and deploying IT resources and capabilities in response to market

changes to sustain performance over time. Therefore, to the best of authors’ knowledge, this study is unique of its

kinds.

VII. CONCLUSIONS AND RECOMMENDATIONS

This study concludes that DITCs are critical to organisational performance in Nigeria. This is because, one of the

major problem with banks performance in Nigerian does not only relied on the ability of banks to market their

products and services directly to customers but also to provide excellent services [22] by reducing cost, increasing

speed, quality, flexibility and dependability which is in line with notion of DITC. [10]; and [12] had the view that the

case of managing contradictions caused by unprecedented changes within the Nigerian banking sector, entail going

beyond selecting the most recent IT resources but a combination of capabilities that enabled banks to sense and

seized opportunities thereby coding IT solutions capable of providing sustain performance over time.

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It is recommended that, mangers should pay attention on building and deploying DITCs in form of ITKC, ITMC

ITPE, and ITIF capable of dealing with environmental changes. That is to say that with increasing environmental

dynamisms banks must focus on matching market uncertainties [37] with the new or improved organisational

capabilities to improve performance [47]. However, the potential values of IT capabilities depend on the future

imagination of the business owners’/managers and their employees. Policy making should thus include public

enlightenment on building capabilities through I.T.

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