Antecedents of Strategic Information Systems Alignment in Iran

JOURNAL OF GLOBAL INFORMATION TECHNOLOGY MANAGEMENT 2016, VOL. 19, NO. 2, 80–103 http://dx.doi.org/10.1080/1097198X.2016.1172953

Antecedents of Strategic Information Systems Alignment in Iran Neda Abdolvand and Mohammad Mehdi Sepehri Department of Information Technology Engineering, Faculty of Industrial Engineering, Tarbiat Modares University, Tehran, Iran ABSTRACT

KEYWORDS

Factors affecting business-information technology strategic alignment have been investigated in numerous research studies, mostly in developed countries including Western Europe and North America. Given that the Western world has a distinct business culture, there is reason to investigate the boundaries of the generalizability of these research studies. This article, therefore, investigates strategic alignment in a non-Western, developingcountry context, specifically Iran. For this purpose, the antecedents of alignment in the existing literature were investigated. After categorizing them and developing a research model, the model was tested using structural equation modeling. Our main aim is to find out whether the antecedents identified in prior studies are also relevant in Iran. The results provide preliminary evidence of differences between the factors affecting strategic alignment in each region.

Business strategy; developing country; Iran; IT strategy; partial least squares; strategic alignment; structural equation modeling

Introduction Strategic alignment between information technology (IT) strategy and business strategy has been and continues to be among the executives’ highest priorities (Luftman & Ben-Zvi, 2010, 2011; Luftman & Derksen, 2012; Luftman et al., 2013). They prioritize strategic alignment because it promotes the appropriate deployment and efficient utilization of IT resources, which can lead to operational benefits, financial gains, and competitive advantage (Chan, Sabherwal, & Thatcher, 2006; Coltman, Tallon, Sharma, & Queiroz, 2015; Wade & Hulland, 2004). This interest has led to extensive research on this topic (Brodbeck, Rigoni, & Hoppen, 2009; Chan & Reich, 2007), and continues to stimulate work, as is indicated by the multiple special issues of information systems (IS) journals (Bharadwaj, Sawy, Pavlou, & Venkatraman, 2013; Coltman, Sharma, & Tallon, 2013). Reviewing 25 years of research on strategic alignment, Coltman et al. (2015) stated that there has been an interest in understanding the antecedents and consequences of alignment between business and IT. Various researchers, including Teo and Ang (1999), Campbell (2005), Luftman et al. (1999), Reich and Benbasat (2000), Preston and Karahanna (2009) have investigated the antecedents of strategic alignment; however, most of these studies have been conducted in developed countries. Antecedents of strategic alignment are, in turn, influenced by other factors, including cultural (ElMekawy & Rusu, 2011) and contextual factors (Chan et al., 2006; Preston & Karahanna, 2009). Therefore, effective factors of strategic alignment can differ from one country to another. Culture refers to, a “collective programming of the mind that distinguishes not only societies (or nations) but also industries, professions, and organizations” (Wang, Ge, Xue, & Liang, 2011, p. 427). According to the findings of Melville, Kraemer, and Gurbaxani (2004), IT value generation is dependent on complementary organizational resources, such as workplace practices, change initiatives, and culture. The differences of culture in different countries make country-specific sets of IT attributes, which CONTACT Mohammad Mehdi Sepehri, Associate Professor [email protected] Department of Information Technology Engineering, Faculty of Industrial Engineering, Tarbiat Modares University, Tehran, Iran, PO 14115-143. © 2016 Neda Abdolvand and Mohammad Mehdi Sepehri

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tend to differences in firm IT choices and resultant organizational performance impacts (Melville et al., 2004). Culture affects individual and organizational behavior, which in turn, is effective in information and communication technology (ICT) outcomes (Leidner, 2010). Moreover, the ability of an organization to apply IT successfully depends on the culture (Melville et al., 2004). Wang et al. (2011) found that the revolutionary changes of business-IT alignment are influenced by some dimensions of Chinese social culture. For example, informal communication is more fitted to Chinese culture (Wang et al., 2011). Indeed, the generalizability of IT-business alignment is one of the main issues in the associated literature (Yayla & Hu, 2012). Although strategic alignment has been studied for more than two decades, it remains virtually unexamined in developing country contexts. The majority of strategic alignment studies have been conducted in the United States and Canada (Al Majali & Md Dahlin, 2008; Yayla & Hu, 2012). A search of the literature between 1995 and 2012 for the words “strategic business-IT alignment,” “strategic alignment,” and “business-IT alignment” in several databases, including the Association of Information Systems (AIS) e-Library, ScienceDirect, Taylor & Francis, Springer, EBSCO, IEEE, Institute for Operations Research and the Management Sciences (INFORMS), Palgrave MacMillan, and M.E. Sharpe and limited to empirical and real case studies yielded 118 articles. These articles illustrate an unbalanced distribution of strategic alignment studies in developed and developing countries (Table 1). North America has the biggest share of studies (39.7%), and Europe is the second (19%). Although the research locations have not been mentioned in 10 studies, their authors’ affiliations refer to developed countries. Only 11 (9.5%) studies have been conducted in South America (4 articles), Middle East (5 articles), Malaysia (1 article), and Turkey (1 article). The literature reveals that developed countries were early to understand the importance of strategic alignment; however, this area of research seems to be understood as important only recently in developing countries. Given that there may be unique IT strategies and organizational ideals in these countries, the applicability of results from these studies may be limited to similar contexts. Outside of North America and Western Europe, where the vast majority of extant research studies have been conducted, different conditions exist in the business environment—conditions that may influence the way IT is utilized and applied to yield organizational performance improvement (Melville et al., 2004; Yayla & Hu, 2012). The national context is a macro-level variable that should be examined in studies of IT application and organizational performance improvement (Melville et al., 2004). Although it is assumed that developing countries, as technology followers, should find, select, buy, and transfer the technologies which they need, and then efficiently utilize these technologies to produce value (Lall, 2000). However, there is a difference between capacity (recourse) and capabilities (the ability to use resources efficiently) (Jelassi & Enders, 2008; Lall, 2000). Additional studies in the developing country contexts are required to answer this question and circumscribe the boundaries of generalizability of strategic alignment theories. Therefore, as a beginning to bridge the current gap, this research focuses on studying the antecedents of strategic alignment in a developing country (Iran).

Table 1. Number of Strategic Alignment Studies in Country Groups. Country North America (United States and Canada) Europe (European countries, European Community, Nordic Countries, Dutch companies, UK, The Netherlands, France, Belgium, Spain, Sweden, Germany, Finland, and Turkey) Australia and New Zealand East Asian countries (Taiwan, Singapore, Malaysia, China, and Hong Kong) South America Middle East (UAE, Jordan, Iran) Global companies, Multinational companies, and Fortune list companies Not mentioned

Number of Articles 47 23 5 14 4 5 10 10

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Today, developing countries are categorized in three groups: The first group has an emerging economy, which, “satisfies two criteria: a rapid pace of economic development, and government policies favoring economic liberalization and the use of a free-market system” (Hoskisson, Eden, Lau, & Wright, 2000, p. 249). Four large, emerging economies are Brazil, Russia, India, and China (BRIC). In 2005, Goldman Sachs introduced the concept of the Next Eleven countries (including Iran) as the second group having the potential to grow and a similar impact like that of BRIC. The third group includes less-developed countries, such as Afghanistan and Iraq (O’Neill, 2007). The geographical scope of this study is narrowed to Iran, which is a country with a transitional economy. The current research attempts to answer this question: “Is there any difference between the antecedents of strategic alignment in Iran and the Western world?” This study, first, provides a comprehensive review of the antecedents of strategic alignment in the Literature Review section. Then, we present a theoretically supported model derived from prior literature in the Hypothesis Development section. In the Research Method section, we explain the development of our questionnaire, the survey administration, and data analysis using structural equation modeling (SEM). The aim of this empirical study is to investigate the influence of the antecedents of strategic alignment in the developing country context and to investigate the relationship between the antecedents. The Model Results section explains the support for our hypotheses, and the Discussion and Conclusion section deals with the implications of the obtained results for both researchers and practitioners. It also includes the limitations of the study and directions for future research.

Research Context Iran can be considered a unique and complex country with both very rich and ancient cultural heritage and strategic location in the Persian Gulf and the Middle East (Yeganeh & Su, 2007). It has a population of over 78 million, with approximately 61% of the population under 30 years of age. Iran’s population is a mix of different ethnicities (including Fars, Kurds, Arabs, Turks, Azeris, Turkemens, and Baluchis) with different linguistic and cultural characteristics; this makes Iran a multicultural state. Overthrowing the Pahlavi monarchy and becoming an Islamic republic country in 1979 brought significant cultural and social changes and led to the implementation of the core values of Islam into the government’s infrastructure and into modern 20th century Iran (Beigi & Shirmohammadi, 2012; Fatemi, Khodayari, & Stewart, 2015; Soltani, Syed, Liao, & Iqbal, 2014). Iran is one of the main oil and gas producers in the world, holding more than 10% of the world’s total proven oil reserves (OPEC, 2014). Oil and gas revenue represents about 90% of total export earnings, and on average, 60% of the government revenues (Farzanegan, 2011; Farzanegan & Markwardt, 2009). The Iranian state has a key role in the economy though market-based reforms have been initiated since 2011 including privatization, outsourcing, and developing non-oil exports. However, the reforms have not changed the dominant role of the government in many key areas, and Iran’s economy is highly sensitive to oil price shocks (Rezaian & Naeiji, 2012). The business environment of Iran has been known as challenging with the country ranking 130 out of the 189 countries surveyed in the 2015 Doing Business Report (World Bank, 2015). The economy and business environment are influenced by both the internal and external challenges (Ahmadi, McKay, & Murphy, 2012; Soltani et al., 2014). Some internal challenges are high unemployment and poverty rate, economic mismanagement and inefficiency, the government’s dependence on oil revenues, and vulnerability to oil price fluctuation (Soltani et al., 2014). The main external challenge is the U.S.-led sanctions since Iran’s Islamic revolution (Soltani et al., 2014), and this has increased in recent years by the sanctions imposed by the United Nations and the European Union (Fatemi et al., 2015). These sanctions have brought difficulties to Iran’s oil-dominated economy (Soltani et al., 2014), decreased the quality-of-life for ordinary citizens (Fatemi et al., 2015; Soltani et al., 2014), and increased the business risks in Iran (Rezaian & Naeiji, 2012).


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Iran suffers high inflation rate and low economic growth. The inflation rate has been reported averagely 14.09 from 1957 until 2015 (Trading Economics, 2015), and is predicted to remain at 17.3% for the current year. Economic growth has been raised from 1.7% in 2013 to 3.0% in 2014 (World Bank, 2015). In 2009, Goldman Sachs labeled Iran as largely disappointed (O’Neill & Stupnytska, 2009), which suffered more from the global financial crisis and needs improvements. Iran’s working environment and management related practices seem different from other countries in the Middle East (Soltani & Wilkinson, 2011). The results of the Global Leadership and Organizational Behavior Effectiveness (GLOBE) regional study of societies in the Middle East pointed out that there is considerable variation on at least one cultural dimension between Iran, Turkey, Qatar, and Kuwait while these four countries are all low on future orientation (Dastmalchian & Kabasakal, 2001). It further revealed that Iran is clustered in South Asian culture with India, Thailand, and Malaysia instead of Arab countries in the region. These features make Iran to have a different context and be proper for investigating the strategic alignment’s antecedents for the purpose of theory generalizability.

Status of ICT in Iran Today, widespread access to IT is one of the major aspects of social and economic life throughout the world (Asemi, 2006). These rapid changes in technology and societal values cause a transition in the Iranian society from a traditional society to a modern one (Beigi & Shirmohammadi, 2012). Despite that major steps have been taken, especially in recent years, to maintain a steady growth in the ICT sector, it currently faces major and some basic challenges requiring a lot more to be done to narrow the gap in IT sector between Iran and developed and even some developing countries. From 1998 to 2006, the Supreme Council of Information and Communication Technology (SCICT) developed a national ICT plan during 1999–2002, titled TAKFA (an acronym of Persian words representing the Iranian National ICT Agenda; Jahangard, 2004), with the aim of coordinating executive activities in Iran (Atashak & Mahzadeh, 2008). TAKFA consisted of five main parts: network infrastructure, law and security; economic and commercial services; governmental services; development of human, cultural, and social resources; and employment and industry (Atashak & Mahzadeh, 2008; Jahangard, 2004). TAKFA caused several initiatives, including dedicating an additional 1% of the fiscal national budget to the objectives of TAKFA in 2002, an increase in ICT budget up to US$400 million in 2003, allocating US$20 million to e-commerce development in 2002, allocating US$20 million to e-education, increasing the Internet bandwidth, and adapting International Computer Driving License (ICDL) as mandatory for all governmental employees (Jahangard, 2004). After 2008, the mission of TAKFA was shifted to fundamental research on applied informatics and framework development for religious, cultural, and ethical policies in the cyberspace (SCICT, 2008). According to Abbasi et al. (2008), Iranian companies and organizations try to maintain a steady growth in the ICT sector; however, various ICT-related problems, including the lack of appropriate technologies, absence of required infrastructures, and lack of explicit IT policy have led each organization to define its own IT master plans with diverse infrastructures, technologies, and budget allocations (Asemi, 2006). The status of ICT in Iran is only explored in very few studies, which have reviewed different areas, such as the country’s technological developments, national policies and strategies for IT development, IT infrastructure and access (e.g. phone lines, mobile phones, etc.), penetration of the Internet, broadcasting, and the computer and telecommunications hardware industry. Almost none of studies have investigated the topic of IT business value and organizational transformation (Kashefi, 2014).

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Strategic Alignment Studies in Iran According to the authors’ search, six Iranian strategic alignment studies have been published in academic journals or conferences Esmaili et al. (2010, 2012) proposed a conceptual model to correlate IT governance and strategic alignment. Hosseinbeig, Karimzadgan-moghadam, Vahdat, and Moghadam (2011a) examined the relationship between IT governance and IT strategic plan compilation and modified Luftman’s strategic alignment maturity model (SAMM) by adding factors from Control Objectives for Information and Related Technology (COBIT). They found low maturity levels in Iranian banks, and pointed out the shortcomings in IT management in Iranian banks (Hosseinbeig et al., 2011a). Hosseinbeig, Karimzadgan-moghadam, Vahdat, and Moghadam (2011b) also found a positive relationship between strategic alignment and IT governance. Jamporazmey, Zehtabi, and Nejati (2011) examined the effect of co-alignment of business strategy, business structure, IT strategy, and IT structure on organizational performance. They found low financial outcome because of high costs of performing IT projects in Iran. Finally, Alaeddini and Salekfard (2013) investigated the effect of enterprise architecture on IT-business alignment using SAMM. Studying these articles (particularly Hosseinbeig et al., 2011a; Jamporazmey et al., 2011) led to the questions of “which factors are effective on strategic alignment in Iranian firms?” and “are there any differences between the strategic alignment’s antecedents in the Western-developed countries and Iran due to cultural implications?”

Literature Review Strategic Alignment As mentioned in the Introduction section, strategic alignment has been studied for decades and still draws considerable interest. Strategic alignment is defined as: “. . .the degree to which the IT mission, objectives, and plans support and are supported by the business mission, objectives, and plans” (Reich & Benbasat, 2000, p. 82). This definition has been affirmed by other researchers (Baker, Jones, Cao, & Song, 2011; Chan et al., 2006), and we utilized it in this research as well. Others present similar definitions, for example, “Alignment means applying IT in an appropriate and timely way, in harmony with business strategies, goals, and needs. It is closely linked with IT strategic planning” (Luftman & McLean, 2004, p. 90). Yet some researchers state that strategic alignment exists if organizational goal and activities and their supportive IS are coordinated and balanced; well-aligned IT and business strategies mean that the enterprise utilizes IT in coordination with business strategies, goals, and requirements (McKeen & Smith, 2003). Among the various areas of strategic alignment research, one that is of particularly keen interest is the study of its antecedents and outcomes (De Assis Moreno, de Souza Costa Neves Cavazotte, & De Oliveira Valente, 2009). In this regard, several models have been developed so far to investigate various antecedents, and that how they influence alignment and how alignment, in turn, influences various process, operational, financial, and strategic outcomes. Research consistently indicates that strategic alignment has beneficial effects for firms (Chan & Reich, 2007).

Antecedents of Strategic Alignment The first step in our literature review was to identify a comprehensive list of factors that have been shown to influence strategic alignment. To accomplish this, we undertook a search of the literature as described in the Introduction section. Additionally, we consulted the annotated bibliography of Chan and Reich (2007) to help ensure that we had not overlooked any articles. From the initial group of articles, we first removed the articles that were non-empirical and those did not investigate factors affecting strategic alignment, leaving us with 18 articles that used factor models.


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Table 2. List of Statistically Significant Factors That Directly Influence Strategic Alignment. Baker, 2004 Luftman et al., 1999 Strong leadership Support of top manager/lack of support of the Beimborn et al., 2009 top manager Executive support IT leadership/ lack of IT leadership Brown & Magill, 1994 IT Failure in meeting its commitment Belief in strategic role of IT Understanding business by IT/ Lack of Corporate vision understanding business by IT Satisfaction with technology management Involving IT in strategy development Satisfaction with technology use Prioritizing IT well/ No well-prioritized IT Campbell, 2005 Business-IT partnership/lack of close Relationship between IT and business relationship between IT-business executives Preston & Karahanna, 2009 Engaging IT mangers with business Shared understanding Celuch, Murphy, & Callaway, 2007 Reich & Benbasat, 1996 Budget for IT Understanding of current objectives Chan et al., 2006 Shared vision for IT Credibility of IT based on previous success Existence of clarified formal business plan Shared knowledge Reich & Benbasat, 2000 Organizational size Communication between business and IT Environmental uncertainty executives Chong et al., 2011 Connections between business and IT Perceived organizational trust planning Perceived communications on business-IT Sha et al., 2011 Strategies to employees Support of top management Perceived knowledge on business-IT strategies innovative culture Fink & Neumann, 2009 normative pressure Managerial capability of IT infrastructure Domain knowledge sharing Johnson & Lederer, 2006, 2010 Teo & Ang, 1999 mutual understanding of CEO/CIO Frequent relationship between IT and its users Kearns & Sabherwal, 2006–7 Top manager’s trust of IT department IT manager’s participation in business planning Commitment of top manager to strategic use Business managers’ participation in IT of IT planning Top manager knowledge of IT Lederer & Mendelow, 1989 Responsiveness of IT department Defined, documented, and formal goals and Efficiency and reliability of IT department vision of the business Ability of IT department in keeping up with IT manager presence in business planning technology advancement CEO encouragement to business managers’ Ability of IT in providing innovative IT presence in IT planning solutions Establish an IT plan IT manager’s knowledge of business Li et al., 2006 Awareness of IT manager of business goals Aligned goals and objectives and objectives Common understanding Availability of business plan for IT manager Aligned process of planning Business-IT management partnership in Collaborative relationship prioritizing the projects

The second step was reviewing the articles that developed a comprehensive list of the factors studied in prior research. Table 2 lists the factors that were identified as having a statistically significant and direct influence on strategic alignment. After developing this list of antecedents, we observed that several commonalities exist among these factors. We, therefore, grouped them into four categories: (1) shared understanding between IT and business, (2) top management support, (3) IT department capabilities, and (4) organizational plan and characteristics. It is necessary to say that we excluded environmental uncertainty from the antecedents’ list as there exists an environmental uncertainty in the country in the current situation. Shared Understanding Between IT and Business Frequent communication between IT personnel and its users increases IS knowledge in strategic business units and business knowledge in IT department. IT applications can meet the users’ needs, which is critical for success, and in this way, the communication of IT and business executives can be facilitated potentially (Teo & Ang, 1999). Close communication between IT functions and the

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Table 3. Shared Understanding Between IT and Business, as an Antecedent of Strategic Alignment. Antecedents IT-business partnership/Lack of close relationship between ITbusiness Relationship between IT and business executives Communication between business and IT executives Frequent relationship between IT and its users

Communicating business-IT strategies to employees

Shared understanding Shared knowledge

Domain knowledge sharing

Perceived knowledge on business-IT strategies Common understanding

Mutual understanding of CEO/ CIO Top manager’s knowledge of IT

IT manager’s knowledge of business

Understanding business by IT/ Lack of understanding business by IT Engaging IS mangers with business

Description Clear communication, effective relationship, and ongoing partnership between IT personnel at all levels and line managers. Relationship should promote understanding of what is happening, lead to support and assistance of business managers, create credibility and trust, and create shared domain knowledge. The degree of personal interaction and exchange between IT and business managers. Frequent relationship leads to better knowledge of business for IT and better knowledge of IT for business; also facilitates partnership between business and IT management, and hence facilitates IT utilization for creating business value. Communication is essential for successful strategy implementation and “is successful if information is transferred from the sender to the receiver with the receiver fully understanding the information he or she received.” (p. 12) “The degree of shared cognition between the CIO and the TMT [top management team] on the role of IS in the organization.” (p. 162) “Ability of IT and business executives, at a deep level, to understand and be able to participate in the others’ key processes and to respect each other’s unique contribution and challenges.” (cited from Reich & Benbasat, 2000, p. 86) “Is expected to influence the effectiveness and efficiency of communication between IT and business executives, and further the connections between business and IT planning.” (p. 4) “Employee’s perception of their understanding of the organization’s business-IT strategies.” (p. 13) “The mutual understanding of each other’s business and practice between ISSP [information systems strategic planning] planners and other business managers during ISSP process, the degree of communication and coordination between ISSP planner and others within the organization.” (p. 533) “The state where communicating individuals agrees on a certain topic or issue.” (p. 50) Top management should be knowledgeable about IT and aware of potential and limitations of IT, potential and limitations of the IT infrastructure in organization, and IT action of competitors. CIOs with high IT and business knowledge foster more effective partnership in TMTs and having an important part in business strategy formulation and implementation. It influences the “extent of IT deployment in business strategies and value chain activities.” (p. 179) IT should understand the priorities of business value measurement and how business perceives the contribution of IT. “The reality is that by getting out and getting them [IS managers] to engage with business you get more of an understanding of the informal business strategies, and you’ve got a lot more chance of building an IT strategy that’s a fit with them.” (p. 661)

Reference Luftman et al., 1999 Campbell, 2005

Reich & Benbasat, 2000 Teo & Ang, 1999

Chong et al., 2011

Preston & Karahanna, 2009 Chan et al., 2006

Sha et al., 2011

Chong et al., 2011 Li et al., 2006

Johnson & Lederer, 2006, 2010 Teo & Ang, 1999

Teo & Ang, 1999

Luftman et al., 1999 Campbell, 2005


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business executives and other key decision makers, is a high-ranked enabler (Luftman, 2000) and important for practitioners (Campbell, 2005). This has been described in several ways in the previous studies, as listed in Table 3. The relationship could be between IT and business executives (Campbell, 2005; Reich & Benbasat, 2000), between personnel (Chong, Chan, Ooi, & Darmawan, 2011; Teo & Ang, 1999), or an inclusive one (Luftman, Papp, & Brier, 1999). Communication between IT and business executives is influenced by shared knowledge (Reich & Benbasat, 2000), which has been known as one of the most important dimensions in social alignment (Sha, Cheng, Pan, & Teoh, 2011). There are two terms in the literature: “shared understanding” and “shared knowledge.” Shared understanding is measured as the amount of shared knowledge between a chief executive officer (CEO) and chief information officer (CIO) (Chan et al., 2006; Reich & Benbasat, 2000). However, Preston and Karahanna (2009) distinguish between shared understanding and shared knowledge. They believe that shared understanding is a result of higher level of business and IT knowledge. They define shared understanding as, “the degree of shared cognition between the CIO and the TMT [top management team] on the role of IS in the organization” (Preston & Karahanna, 2009, p. 162). Shared knowledge can be developed when IT and business executives improve their knowledge about business and IT (Chan et al., 2006). Since communicating the business plan may lead to the alignment of the IS plan with business goals and strategies (Lederer & Mendelow, 1989; Teo & Ang, 1999), a partnership between IT and business has been mentioned significantly in the studies, as summarized in Table 4. When an IT manager participates in business planning, and business executives participate in IT planning, an alignment of the business and IT goals, objectives, and plans can happen. Participation of CIO in business planning may help him to learn business strategies first hand and allow him to develop a higher level of business strategy understanding (Lederer & Mendelow, 1989). Planning is a process, and alignment can happen if the IS planning and business processes are aligned. Therefore, an IS plan cannot be developed without implications of business (Li, Ji, & Li, 2006); thus IS executives encourage the comments of business executives during the IS planning (Lederer & Mendelow, 1989). The mutual partnership leads to improvement in reflecting business objectives in IT plans (Kearns & Sabherwal, 2006–2007) and, ultimately, to successful IS planning (Teo & Ang, 1999). Top Management Support Top management support, a top-ranked enabler (Luftman et al., 1999), can promote strategic alignment in several ways (see Table 5). Top management support has a crucial role in gaining firm-internal abilities and shaping the firm’s environment, and it is not possible to delegate, ignore, or avoid it (Beimborn, Schlosser, & Weitzel, 2009). Top management should play a strong leadership role, rather than a controlling one (Baker, 2004; Teo & Ang, 1999). Satisfaction with the IT department and trust in the IT department result in the top management’s commitment in participating in the alignment process (Burn & Szeto, 2000), the strategic use of IT, and the financial support of IT spending. These processes can cause IT functions and spendings to match environmental demands (Beimborn et al., 2009), and a better alignment of IT and business (Teo & Ang, 1999). IT Department Capabilities IT department capabilities play a significant role in the strategic alignment process. Numerous constructs demonstrating this reality have been included in previous studies to explain how an IT department’s capabilities can promote strategic alignment and, ultimately, lead to competitive advantage (Table 6). These managerial capabilities include business processes such as new technology identification, business applicability evaluation, prioritizing investments, and enhancing the managers’ knowledge of IT potential. Each of these processes depends on the IT department to have a robust understanding of technical possibilities available in the marketplace, a business orientation, and the ability to form relationships with senior managers (Fink & Neumann, 2009; Luftman et al., 1999). When the IT department is known within the organization as efficient and reliable and when the past successes of the IT department are evident, it gains credibility within the organization, aiding in the procurement

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Table 4. IT-Business Partnership, as an Antecedent. Antecedents Connections between business and IT planning Aligned goals and objectives Understanding of current objectives

IT manager’s presence in business planning Involving IT in strategy development

IT manager’s participation in business planning

Awareness of IT manager of business goals and objectives Availability of business plan for IT manager Shared vision for IT Aligned process of planning Collaborative relationship CEO encouragement to business managers’ presence in IT planning Business managers’ participation in IT planning

Business-IT management partnership in prioritizing the projects Prioritizing IT well/Not well-prioritized IT

Definition Connecting planning processes through shared meeting for prioritizing both business and IT projects. “The degree of coherence or alignment between ISSP goals and business strategic goals.” (p. 533) “The goals and strategies for business and IT for the next one-two years, was measured by assessing: (1) the level of understanding that IS executives had about current business objectives, and (2) the level of understanding that business executives had about current IT objectives and then creating an overall score for the business unit.” (p. 63) IS management cooperation in the area of technology development and consultation for organizational plan and objectives. “[There is a] need for mutual cooperation and a close working relationship in the strategy formulation process [and] it is easier to achieve alignment when cross-functional teams, including IT, create enterprise strategies.” (p. 17) “Facilitate knowledge integration across business and IT managers by enabling socialization, which integrates knowledge through joint activities, such as working together in the same environment, as well as exchange, which is the communication or transfer of explicit knowledge between individuals.” (p. 133) Business goals and objectives must be made known to IS management in order to link or align IS plans to business plans. “By making corporate business plans available, business goals and objectives will be made known to IS management.” (p. 183) “A clear expectation of the role IT would play in contributing to the longterm success of the organizational unit.” (p. 63) “The impact of business strategy on ISSP process.” (p. 533) “The support and impact of business and business strategy on ISSP.” (p. 534) Encouraging business participant by getting their feedback on IS planning, requesting for setting IS priorities, and asking to indicate their own IS plan for their own departments. “Facilitate knowledge integration across business and IT managers by enabling socialization, which integrates knowledge through joint activities, such as working together in the same environment, as well as exchange, which is the communication or transfer of explicit knowledge between individuals.” (p. 133) Facilitating partnership by mutual understanding of IT and business goals, problems and limitation for evaluating IT projects and ensuring “the priority is given to the development and implementation of critical IT applications.” (p. 181) Incorporating technology into the company strategies in a timely manner to leverage business opportunities by business approval to achieve better appreciation for IT.

Reference Reich & Benbasat, 2000 Li et al., 2006 Reich & Benbasat, 1996

Lederer & Mendelow, 1989 Luftman et al., 1999

Kearns & Sabherwal, 2006–7

Teo & Ang, 1999 Teo & Ang, 1999 Reich & Benbasat, 1996 Li et al., 2006 Li et al., 2006 Lederer & Mendelow, 1989

Kearns & Sabherwal, 2006–7

Teo & Ang, 1999

Luftman et al., 1999


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Table 5. Top Management Support, as an Antecedent. Antecedents Strong leadership Support of top manager/ Lack of support of the top manager Top management support Executive support

Budget for IT

Commitment of top managers to strategic use of IT Belief to strategic role of IT Top managers’ trust on IT department Satisfaction with technology management Satisfaction with technology use

Definition Management style and management perspective is effective, creating a collaborative culture and aligned visions. “The need for business to be aware and supportive of technology innovations. . . Lack of support may translate into lack of funding.” (pp. 16–17) Management is who lead the transformation and top management support “creates a conductive environment for implementation.” (p. 6) “the role of top management is crucial for gaining firm-internal abilities and shaping the firm´s environment (p. 4) in terms of both structural (IT represented in the board) and behavioral (top management does actively support and propel alignment).” (p. 1) “IT expenditures will contribute to firm performance when IT spending is oriented toward capturing and managing relevant information from external stakeholders, such as customers and competitors in order to better coordinate internal activities.” (p. 190) Top management should view “IT as strategic tool for competitive advantage” (p. 178) and dedicate critical resource to it and play a leadership role in terms of providing directions for strategic IS initiatives rather than a controlling role in determining details of IS planning activities. “The extent to which a firm’s management has a “shared belief” in the strategic role of IT for that firm could require a shift in the relationship with IS and business planning.” (p. 399) Top management trust in the IT department, which may enable the allocation of appropriate resources for the planning and development of strategic IT applications. “Capture overall customer satisfaction along with other perceptions of performance found to be of primary importance for IS misalignment contexts.” (p. 388)

Reference Baker, 2004 Luftman et al., 1999 Sha et al., 2011 Beimborn et al., 2009

Celuch et al., 2007

Teo & Ang, 1999

Brown & Magill, 1994 Teo & Ang, 1999 Brown & Magill, 1994 Brown & Magill, 1994

Table 6. IT Department Capabilities, as an Antecedent. Antecedents IT leadership/Lack of IT leadership Managerial capability of IT infrastructure

Responsiveness of IT Credibility of IT based on previous success IT failure in meeting its commitment Efficiency and reliability of IT Ability of IT in keeping up with technology advancement Ability of IT in providing innovative IT solutions

Definition The most important leadership role is to recognize IT innovation across the industry and innovative opportunities. “Managerial services involve such activities as identifying new technologies and evaluating their business applicability, defining investment priorities, and educating management on how to generate value from IT. Such capabilities require technical understanding, a business orientation, and an ability to form relationships” (p. 92). The IT department should serve user/business needs in an efficient and reliable manner. “How managers view new or future strategic IS opportunities is affected by their looking back at experiences with past ones. As a result of past system failures, IS may lose credibility with top management and end-users” (p. 29). IT is overwhelmed, the projects are late and over budget and business executives and end-users are frustrated, negatively affecting IT credibility. Efficiency and reliability of the IT department enables joint formulation of business and IT strategies, avoiding senior management’s hindrance of IT planning efforts, isolated IT application implementation, or minimal resource allocation. “By keeping up with advances in IT, IS staff will be better able to suggest appropriate applications to support business objectives and strategies. Such applications may be crucial to the firm’s long term survival” (p. 180). “By coming out with creative ideas for the strategic use of IT, IS management demonstrates the strategic relevance of IT to the organization” (p. 182).

Reference Luftman et al., 1999 Fink & Neumann, 2009

Teo & Ang, 1999 Chan et al., 2006

Luftman et al., 1999 Teo & Ang, 1999

Teo & Ang, 1999

Teo & Ang, 1999

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Table 7. Business Plan Is an Effective Antecedent. Antecedents Corporate vision Existence of clarified formal business plan Defined, documented and formal goals and vision of the business Establishment of an IS plan Normative pressure Innovative culture

Definition “The choice businesses the firm will compete in, including the number of businesses engaged in as well as how well those businesses fit together.” (p. 397) Written one/five year business plans that outline the need for IT projects and vision in supporting business strategies and mission. Business plan should define clear objectives, allocation of funds, business mission, organizational purpose, goals, long-term action plans, action steps, persons responsible and timetables and reflect the IS plan. A prerequisite to coordination in which information about business plan and information outside the organization is obtained and used for determining future IT directions. There are both external and internal pressures for IS implementation and firms should in coercive pressure to take action. “The culture of innovation served as a premise to create a hasslefree experience for . . .[customers].” (p. 6)

Reference Brown & Magill, 1994 Reich & Benbasat, 1996 Lederer & Mendelow, 1989

Lederer & Mendelow, 1989 Sha et al., 2011 Sha et al., 2011

of resources and providing the ability for the IT department to be an active partner in strategic planning for the business (Chan et al., 2006; Luftman & Brier, 1999; Teo & Ang, 1999). Organizational Plan and Characteristics Several antecedents mentioned in previous studies refer to the organizational plan and characteristics (Table 7). If there are no determined and clarified business strategies, there will be the likelihood of confusing and bewildering technological choices, leading to waste of resources; thus, alignment cannot happen (Lederer & Mendelow, 1989; Reich & Benbasat, 1996). Developing business goals and objectives is known as the first step in the alignment process (Chan & Reich, 2007). Through strategic planning, it is possible, “to reconfigure the organization’s resources and competencies to address changes in organizational strategy and IT strategy” (Baker & Jones, 2008, p. 19). Although it is emphasized that it should be contained in a formal and documented business plan, an informal IT plan is sufficient. Based on the results of strategic alignment studies of SME manufacturers, 66% of those manufacturers that reached strategic alignment had a documented business plan; however, only 25% had a formalized IT plan (Cragg, King, & Hussin, 2002). Finally, the examination of the antecedents of strategic alignment in terms of culture is emphasized (Chan & Reich, 2007), and two more antecedents are mentioned: organizational innovative culture and normative pressure (Sha et al., 2011). Corporate culture is defined as, “the shared values and norms of behavior that allow the organization’s employees, at every level, to work together successfully toward a common goal” (Chan & Reich, 2007). Corporate culture builds a working environment through which the alignment can be pursued (Chan & Reich, 2007).

Research Model and Methodology After extracting the strategic alignment’s antecedents and categorizing them into four main groups, the research model is developed and empirically tested, as described in the following text.

Hypotheses Development In the literature review section, the effect of antecedents on strategic alignment has been meticulously described; therefore, here, the hypotheses are described concisely in the following text.


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Shared Understanding Between IT and Business Shared understanding is one of the main enablers of strategic alignment and the lack of understanding between CEO and CIO is an inhibitor (Luftman & Brier, 1999; Preston & Karahanna, 2009). Several researchers distinguished between shared understanding and shared knowledge. Shared understanding is an integrated knowledge which is derived from the shared knowledge of CEO and CIO about business and IT (Preston & Karahanna, 2009). The findings of Preston and Karahanna (2009) indicated that shared understanding leads to alignment and integration of IT and business capabilities. Shared understanding is derived from the IT knowledge of business and the CEO’s knowledge of IT, and is influenced by their relationship. Relationship/communication between business and IT has been considered in three ways in preceding research: the relationship between IT and business executives (Campbell, 2005; Reich & Benbasat, 2000), the relationship between personnel (Chong et al., 2011; Teo & Ang, 1999), and an inclusive relationship (Luftman et al., 1999). While Campbell (2005) believes that IT personnel are not able or interested in developing relationships, Chong et al. (2011) considers employees to be effective in achieving strategic alignment. The relationship between business and IT personnel is considered crucial to ensure IT applications meet the users’ needs, which is critical for success. Kearns and Sabherwal (2006–2007) discuss that IT partnership in business planning and business partnership in IT planning facilitate knowledge integration by enabling “socialization.” Therefore, shared knowledge is measured by “IT manager’s knowledge about business,” “top managers’ knowledge about IT,” and “partnership in defining business and IT plan.” H1: Shared understanding between IT and business is positively related to strategic alignment. H1a: Shared domain knowledge is positively related to the shared understanding between IT and business.

Top Management Support Top managers’ support is an enabler, and lack of this support is an inhibitor of alignment (Luftman et al., 1999). This factor has been emphasized by preceding research (Beimborn et al., 2009; Teo & Ang, 1999). Top manager plays a crucial role in allocating the firm’s internal abilities and shaping its environment (Beimborn et al., 2009). Strategic use of IT by a top manager depends on his/her satisfaction with and his/her confidence in the IT department (Teo & Ang, 1999). H2: Top management support is positively related to strategic alignment.

IT Department Capabilities IT department capabilities including credibility, efficiency, leadership, and reliability have been known as the enabler of strategic alignment (Fink & Neumann, 2009; Luftman et al., 1999; Teo & Ang, 1999). Users’ perception of the IT department influenced by past experiences (Chan et al., 2006) is dependent on the efficiency, reliability, and credibility of the department (Teo & Ang, 1999). Moreover, as IT applications are becoming increasingly important in enterprises, the ability of IT to keep up with advances and suggest innovative solutions plays a crucial role in planning and implementing new technologies (Teo & Ang, 1999). H3: IT department capabilities are positively related to strategic alignment.

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Organizational Plan and Characteristics Developing business goals and objectives is the first step in the alignment process (Chan & Reich, 2007). Determined and clarified business strategies make alignment happen by diminishing the probability of confusing and bewildering the selection of technologies. Finally, by emphasizing the need to examine the antecedents of strategic alignment in terms of culture (Chan & Reich, 2007), organizational innovative culture and normative pressure are two more mentioned antecedents (Sha et al., 2011). Corporate culture builds the working environment through which the alignment can be pursued (Chan & Reich, 2007). H4: Organizational plan and characteristics are positively related to strategic alignment. Research Method Aiming to describe the strategic alignment’s antecedents in Iran, as a developing country, this study was done with statistical descriptive-exploratory method using a survey. After a meticulous literature review, a survey measurement (Appendix A.) was developed to test the hypotheses and validate the constructs. In developing the measurement tools, several constraints were considered. It is more difficult to collect information about enterprises in developing countries than in developed countries (Mishkin, 1996). In Iran, the weak university–industry relationship (Kumar & Kharazmi, 2010) has caused the executive managers to be less interested in research participation than in developed countries. Meanwhile, large number of questions in the questionnaire may lead to lower participation level. As a solution, the questionnaire contained the minimum sufficient number of questions. Additionally, the top managers were selected from among the university graduates who maintain their connection to universities through alumni. So, we explored a questionnaire with one question for each antecedent and the strategic alignment. The questionnaire responses were based on a 7-point Likert scale ranging from 1 (strongly disagree) to 7 (strongly agree). We also added more demographic questions to describe the industry, its ownership, and the position of the respondents. After developing the questionnaire survey, local experts’ judgment was used for content validity. Then a pilot study of 12

Table 8. Results of Factor Analysis. IT Department Capabilities IT_Credibility 0.88 IT_Efficiency 0.89 IT_Leadership 0.76 IT_Reliability 0.78 MGM_Leadership 0.39 Mgm_Commitment 0.53 Mgm_Financial_Support 0.42 Mgm_Trust 0.52 P1_Formal_Business_Plan 0.27 OS1_Organizational_Culture 0.55 OS2_Normative_Pressure 0.37 CEO_knowledge_of_IT 0.41 CIO_knowledge_of_Business 0.56 Partnership_of_IT-Business 0.67 SD1_CEO-CIO_Relationship 0.55 SD2_Business-IT0.58 Relationship

Top Management Support 0.53 0.49 0.47 0.42 0.77 0.84 0.83 0.70 0.46 0.49 0.49 0.57 0.41 0.55 0.59 0.42

Organizational Plan and Characteristics 0.46 0.43 0.49 0.32 0.60 0.47 0.45 0.41 0.76 0.79 0.76 0.50 0.29 0.46 0.56 0.45

Shared Domain 0.59 0.61 0.61 0.57 0.53 0.58 0.47 0.48 0.34 0.46 0.42 0.68 0.79 0.85 0.52 0.45

Shared Understanding Between IT and Business 0.59 0.53 0.46 0.48 0.44 0.51 0.40 0.43 0.37 0.46 0.44 0.36 0.40 0.48 0.92 0.90


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academic members was run to test the questionnaire. After validation, we used it for the data collection. Cronbach’s Alpha = 0.92 was obtained for the whole scale. Cronbach’s alpha for each construct is presented in Table 10. SEM is a commonly used technique for data analysis in strategic alignment research. Numerous researchers including Chan et al. (2006), Preston and Karahanna (2009), Fink and Neumann (2009), and Chong et al. (2011) have made use of it. Moreover, Preston and Karahanna (2009) used partial least squares (PLS) for their model analysis. Based on theoretical discussion and learning from the literature, a path diagram of a SEM was developed, which includes extracted antecedents as indicator variables, and six latent variables in four hypotheses. The confirmatory factor analysis verified that there was a relationship between the observed variables and their constructs. In this test, an indicator (management satisfaction) has been omitted from the model because of loading less than 0.6. Table 8 illustrates the results and the indicators of each construct.

Data Collection Because of the weak university–industry relationship, we developed a list of 300 alumni from MBA, EDP, and MIS programs in Tehran. The universities included were Sharif University of Technology, Tarbiat Modares University, K.N.Toosi University of Technology, Amirkabir University of Technology, Alameh Tabatabaei University, and Islamic Azad University. These people occupied top management positions in different state-owned and private organizations and had good IT knowledge based on their majors. Hence, they could help us to reach enterprises where IT plays more strategic roles. Of the 300 surveys sent out using e-mails, 169 responses came back (two were discarded because of incomplete data), giving a 56.3% response rate. Of these respondents, 36.5% were CEOs or top managers, 18.6% were IT managers, 37.7% were technical managers, and 7.2% were in marketing or finance departments. Based on the final results, the research covered various industries, including service, manufacturing, IT sector, communication, financial, education, insurance, transportation, health, oil and gas, consulting, import and export, and public services. The profile of the industry type is summarized in Table 9. Of these results, 41.3% were state-owned enterprises, 37.7 were private enterprises, and 21% were stock companies.

Validation and Reliability PLS-SEM was used to estimate the effect of antecedents affecting the business-IT strategic alignment. Wold (1960) introduced PLS, and recently Chin (1998, 2003) revitalized it in the IS field (Peng & Lai, 2012). Because of the vast potential of PLS-SEM, it is a promising method for researchers in various disciplines including marketing and management IS (Hair, Ringle, & Sarstedt, 2012). According to the editors of MIS Quarterly in March 2012, the use of PLS-SEM has apparently increased (Ringle, Sarstedt, & Straub, 2012). PLS-SEM is proper for both formative and reflective constructs (Hair et al., 2012; Table 9. The Profile Results of the Industry Type. Industry Service Manufacturing IT sector Communication Financial Education Insurance Others

Percentage of Respondents 22.2 18 14.4 10.8 9.6 9 7.2 9

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Table 10. Reliability and Validity of the Model’s Construct. IT department capability Top management support Organizational plan and characteristics Shared domain Shared understanding between it and business Strategic alignment

AVE 0.69 0.62 0.60 0.60 0.83 1.00

Composite Reliability 0.90 0.87 0.82 0.82 0.91 1.00

R Square

0.29 0.36

Cronbach’s Alpha 0.85 0.80 0.66 0.67 0.79 1.00

Communality 0.69 0.62 0.60 0.60 0.83 1.00

Preston & Karahanna, 2009) and much smaller and non-normal data (Hair et al., 2012). It is proper for the research in which the aim is to explore or extend an existing structural theory (Hair et al., 2012). For rigor of the research, the reliability and validity of the constructs were measured. For measuring the reliability of reflective constructs, composite reliability is a proper criterion. The composite reliability index should be higher than 0.7. Convergent validity indicates validity of reflective constructs, which is measured by average variance extracted (AVE). The AVE value should be higher than 0.5; this means that more than half of the variance of the indicators is accounted by the latent variable (Xiaoying, Qianqian, & Dezhi, 2008). Table 10 illustrates the validity and reliability indexes for the reflective constructs. It is apparent that all values for AVE and composite reliability are satisfactory. The next step is to evaluate the model fitness. For this, we should use communality index and coefficient of determination (R2) (Vinzi, Trinchera, & Amato, 2010). According to Chin (1998), an R2 value higher than 0.67 is substantial, higher than 0.33 (and less than 0.67) is moderate; and 0.19 is weak (Chin, 1998). Table 10 shows the R2 values for endogenous constructs and communality index for each construct. As illustrated, all communality values are satisfactory though the R2 for strategic alignment (0.36) is moderate.

Model Results In this study, we used PLS-SEM to empirically test the developed theoretical model. PLS-SEM consists of the constructs (measurement models) and a structure model. The former describes the relationship between the indicator and latent variables, and the latter demonstrates the relationship between the latent variables. Both of these were described by path coefficients. Figure 1 illustrates the path coefficients in the constructs and the structural model. By interpreting the path coefficients and considering the p-values, all of the hypotheses except H3 were supported. Based on the results, shared understanding between IT and business had a low significant positive influence on strategic alignment (H1); IT department capabilities had a significant strong and positive influence on strategic alignment (H2); organizational plan and characteristics had a significant positive influence on strategic alignment (H4); and the influence of top management on strategic alignment was not empirically supported (H3). Lederer and Mendelow (1989) found that top management support is a key factor in success of IT executives. Brown and Magil (1994) suggested that CEO’s vision impacts directly on the environmental variables and the organizational plan and characteristics. Therefore, the hypotheses and the model were modified by considering the impact of the top management support on shared understanding between IT and business, IT department capabilities, and organizational plan and characteristics to investigate the indirect impact of top management support on strategic alignment (Figure 2). Accordingly, new hypotheses are: H3-1: Top management support is positively related to the shared understanding between IT and business. H3-2: Top management support is positively related to IT department capabilities. H3-3: Top management support is positively related to organizational plan and characteristics.


Leadership

0.51

Reliability

0.58***

Credibility Efficiency Leadership Financial Support Trust Commitment

AlignmentStrategic Alignment

0.85*

***

0.38*

Shared understanding between IT and business

department capabilities

0.66*** 0.63***

0***

0.51*** 0.57*** 0.71***

95

0.64

0.31 X

***

0.69***

53**

Business-IT Relationship CEO-CIO Relationship

Top management supportIT Shared domain

0.50*** 0.45

***

Formal Business Plan Normative Pressure Organizational Culture

0.53***

0.54*** IT knowledge of Business 0.42***

Organizational plan and characteristics

0.59***

0.49***

CEO knowledge of IT Partnership of ITBusiness Plan

Figure 1. Path diagram of a structural equation model and analysis results. **Significant at 0.05; ***significant at 0.01; ****significant at 0.001.

*

Strategic Alignment Strategic

0.43*

0.92

0.62 IT department capabilities

Organizational plan and characteristics

***

0.35***

Shared understanding between IT and business 0.6

Shared Domain

0.53 *** 0.89

***

0.62***

Top management support

Figure 2. Modified model and its results. **Significant at 0.05; ***significant at 0.01; ****significant at 0.001.

The new model was found to be valid at and reliable by the AVE higher than 0.6 and the composite reliability higher than 0.8. Item loadings were also valid and greater than 0.50 for all items (Table 11). Moreover, the model’s fitness indexes were based on acceptable communality index (higher than 0.6) and moderate R2 (0.36). Based on this modified model, all the previous results were satisfactory and all the previous hypotheses (but H3) and new ones were supported. Furthermore, we concluded that the construct of top management support has significant influence on shared understanding between IT and business, IT department capabilities, and organizational plan and characteristics.

Discussion and Conclusion This study aimed to empirically test the relationship of strategic alignment with its antecedents in Iran. In pursuing the main objective, the antecedents of strategic alignment were extracted using a

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Table 11. Results of Factor Analysis for Modified Model. IT Department Capabilities IT_Credibility 0.88 IT_Efficiency 0.88 IT_Leadership 0.76 IT_Reliability 0.80 Mgm_Leadership 0.38 Mgm_Commitment 0.53 Mgm_Financial_Support 0.42 Mgm_Trust 0.53 P1_Formal_Business_Plan 0.26 OS1_Organizational_Culture 0.54 OS2_Normative_Pressure 0.38 CEO_knowledge_of_IT 0.40 CIO_knowledge_of_Business 0.56 Partnership_of_IT-Business 0.67 SD1_CEO-CIO_Relationship 0.55 SD2_Business-IT0.58 Relationship

Top Management Support 0.54 0.50 0.48 0.43 0.75 0.85 0.82 0.73 0.45 0.48 0.49 0.56 0.42 0.56 0.60 0.43

Organizational Plan and Characteristics 0.46 0.43 0.48 0.32 0.60 0.47 0.45 0.41 0.76 0.78 0.77 0.50 0.29 0.46 0.56 0.45

Shared Domain 0.59 0.61 0.61 0.57 0.53 0.58 0.47 0.48 0.34 0.46 0.42 0.68 0.79 0.85 0.52 0.45

Shared Understanding Between IT and Business 0.59 0.53 0.46 0.48 0.44 0.51 0.40 0.43 0.38 0.47 0.44 0.36 0.40 0.48 0.92 0.90

conceptual study, which resulted in a theoretical model composed of four main antecedents: shared understanding between IT and business, top management support, IT department capabilities, and organizational plan and characteristics. These variables were considered to have a direct relationship on strategic alignment, and shared domain directly affects shared understanding between IT and business and indirectly affects strategic alignment. These variables made four hypotheses and constructed a SEM that was analyzed by PLS. Based on the statistical analysis, all of the hypotheses (except H3) were supported. This means, consistent with previous studies, three constructs including shared understanding between IT and business, IT department capabilities, and organizational plan and characteristics have a direct relationship with strategic alignment. The IT department capabilities have the most significant effect on strategic alignment. In contrast to the findings of previous studies, the results of this research revealed that top management support is not significantly related to strategic alignment; therefore, an indirect effect was suggested because it is known to be effective on IT success, and organizational plan and characteristics. The empirical results of the new model confirmed that top management support has a significant relationship with shared understanding between IT and business, IT department capabilities, and organizational plan and characteristics, and indirectly affects strategic alignment. Iran, as an ancient Islamic country, is in transition from a traditional to a modern society (Fatemi et al., 2015). Its socio-economic, political and cultural contexts impact the effectiveness of organizational managers (Nazarian, Atkinson, & Greaves, 2014; Soltani et al., 2014). Iran’s management system seems to be a hybrid of western, ancient and Islamic styles. Enhancing productivity and quality is the aim of Iranian managers in adapting the western management style, which brings by itself a focus on flexibility, low power orientation, preparedness to take risks, and low rule orientation. Iranians respect and follow the traditions and norms of the 6,000-year-old Iranian culture (Soltani, 2010). As a heritage in management style, the focus on power and control is considered as a good management style (Soltani, 2010), while the centralization of power and authority causes inefficiency in public institutions and lack of motivation, absence of participation, and centralization of management practices in the private sector (Ali & Amirshahi, 2002; Nazarian et al., 2014). Moreover, Iranian managers are very formal and make minimal plans for the future (Ali & Amirshahi, 2002; Javidan & Dastmalchian, 2003; Nazarian et al., 2014). Islamic culture values equality and justice as well as protection and support for subordinates (Soltani, 2010), which is amplified by the dominant paternalistic culture. The structure of the family as one of the main ancient and Islamic norms considers the father as the head of family (Nazarian et al., 2014).


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Applying the same structure to the organization, the manager will be considered the father or older sibling (Javidan & Dastmalchian, 2003; Nazarian et al., 2014). Consequently, managers make decisions in an autocratic process and communicate them in a command and control method (Javidan & Dastmalchian, 2003). This mix of styles makes Iranian managers to act independently and at the same time need to sustain their staff’s loyalty (Soltani, 2010). The hierarchical orientation further causes unequal distribution of power (Yeganeh & Su, 2007). Several studies have been conducted on organizational culture in Iran (Nazarian et al., 2014). Most of the researchers attempt to explain managerial and cultural attributes of Iran through Hofstede’s 5D cultural model (Soltani et al., 2014; Soltani & Wilkinson, 2011): power distance, individualism, uncertainty avoidance, masculinity, and long-term orientation (Soltani & Wilkinson, 2011). According to this model, manifestations of high-power distance in Iran are top-down management, authoritarian decision-making, and hierarchical structure of reward systems. According to Javidan and Carl (2004), it is not recommended, to change things and break the status quo because it may mean a change in the balance of power in the organization. Furthermore, the lack of emphasis on positive feedback may also be driven by high power distance because it may reflect an attitude that subordinates are simply following orders and do not deserve any special recognition. (p. 685)

These factors contradict IT values, which tend to flatten the organizational structure and build a collaborative work environment. In addition, distinguishing features of Iranians include individualism and in-group orientation (Javidan & Dastmalchian, 2003; Soltani & Wilkinson, 2011). This means that personal connections and informal channels seem more efficient and practical than formal systems and official institutions in the Iranian working environment (Yeganeh & Su, 2007). In addition, collective organizational goals and shared vision are less important than individual goals and interests (Javidan & Dastmalchian, 2003; Soltani & Wilkinson, 2011). Power distance, high in-group collectivism (Javidan & Dastmalchian, 2003) and unclear and often changing rules (Gupta, Surie, Javidan, & Chhokar, 2002) cause firms to lack rule orientation and rank Iran low in uncertainty avoidance (Gupta et al., 2002; Javidan & Dastmalchian, 2003). Iranians’ management culture is characterized by low gender egalitarianism. Although Iranians are interested in practicing process improvement, they do not emphasize long-term and future-oriented behaviors (Soltani & Wilkinson, 2011; Yeganeh & Su, 2007). This focus on the past causes managers to neglect long-term plans (Yeganeh & Su, 2007). In the context of this study, it can be said that top management does not emphasize long-term strategic alignment. While strategic alignment emphasizes participative planning, shared knowledge, and shared understanding, these characteristics are contrary to Iranian culture. Our statistical results support this idea; the level of strategic alignment in the present work was obtained as very strong in only 9.5% of private companies, 5.8% of state-owned companies, and 2.9% of stock companies.

Practical Implications The findings of this study indicated that IT department capabilities have the most significant effect on strategic alignment. As the CIO has been known for an evolving role, this modern technology department should play a leading role in Iranian organization for strategic alignment. However, top management support was more effective in shared understanding and organizational plan and characteristics. Therefore, top management support can increase the readiness of organization, and strengthen the IT department when this department drives the organization to the businessIT strategic alignment. In order to increase the business knowledge of IT department, managers can support the alignment process by recruiting strong leaders and efficient, high-skilled, trustworthy, and reliable employees. Additionally, organizational leadership should provide a clear and formal

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business plan communicated by the IT department. Change management approaches can cause employees to tolerate normative pressures of IT projects and changes. Finally, the culture and structure of the organization should simplify the relationship between the IT department and business departments. A good shared understanding between IT and business can be started by a good relationship between CEO and CIO, which may increase the CEO’s knowledge of IT and the CIO’s knowledge of business. It is obvious that, in a good relationship, the CIO can better explore the potential of IT, as a strategic weapon; hence, better planning could be conducted for strategic alignment.

Theoretical Implications This study contributes to the literature on strategic alignment in two ways. First, it makes use of a theoretically supported model of strategic alignment’s antecedents, which are identified and categorized using a comprehensive review of the associated literature. This model has been used to investigate the antecedents of strategic alignment in Iran, and its findings can help in generalizability of the theory in developing countries. As the second contribution to research, the results of this study reveal a difference in the strategic alignment’s antecedents between developed countries and Iran, as a developing country. The findings approve the effect of cultural conditions, and are consistent with those of Wang et al. (2011), Yayla and Hu (2012), and Masli et al. (2011), that cultural and environmental conditions are effective on the key factors of business-IT strategic alignment. Therefore, more studies on various countries with different cultural and structural environments are necessary before generalizing the strategic alignment theories. Furthermore, this debate could be true that empirically testing the strategic alignment theories in various and different contexts is necessary. In this regard, it seems necessary to test other associated theories in different countries. For example, one of the most empirically tested theories is the implication of strategic alignment on the organizational performance. According to Leidner (2010), culture affects individual and organizational behavior, which is, in turn, effective in ICT outcomes. Thus, can we be sure about the strategic alignment’s implications in developing countries?

Limitations and Future Research This study suffered a problem in level-of-analysis, which is frequent in the IS literature. This limitation arose due to the difficulties in accessing secondary data in Iran. The data were gathered from diverse individuals in different companies and industries in various contexts, while strategic alignment in organizational level was studied. Indeed, the results revealed how people interpret, consider and understand the topic of IT-business alignment in organizations, in general. The authors wish to gather more responses; this would make it possible to investigate the antecedents regarding industry ownership type and industry sectors. This study revealed a different result regarding top management support direct impact on strategic alignment; hence, a potential research area is suggested to examine more social and cultural antecedents for developing countries, including environmental uncertainty and management style. We further wish to extend the scope of research to measure the implications of strategic alignment on the organizational performance. Additionally, this study was done in only one developing country with mixed features of ancient, Islamic, and modern culture. Hence, it is impossible to generalize the model. Investigating the antecedents in various developing countries is a potential future study. Similar to antecedents, other findings and theories of strategic alignment can be influenced by contextual and cultural factors.


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Acknowledgments The authors would like to express their appreciation to Dr. Jeffrey M. Baker for his valuable comments and sharing his knowledge. Moreover, the authors appreciate Dr. Vahid Baradaran and Mr. Rasool Gholamzadeh for their kind help in statistical analysis.

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Author Notes Neda Abdolvand is an assistant professor in Alzahra University and was a postdoctoral research fellow at Tarbiat Modares University. She holds her PhD and MS in information technology from Tarbiat Modares University and a post graduate certificate in information systems from Melbourne University. She is interested in research in the field of information systems, including technology adoption, strategic alignment, and big data analytics. She has been a member of the Association for Information Systems since 2009. Medi Mehdi Sepehri is an associate professor at the Department of Industrial Engineering, Tarbiat Modares University (TMU), Tehran, Iran; founder and head of The Laboratory for Healthcare Systems Optimization, Engineering, and Informatics (HCSE); Head of Industrial Engineering Group; Editor-in-Chief, International Journal of Hospital Research, the official peer review publication of Hospital Management Research Center (HMRC), Iran University of Medical Sciences. Dr. Sepehri obtained his MSc and PhD in management science from the University of Tennessee, Knoxville, Tennessee, USA, in 1987 and 1991. His current research focuses on operations research in medicine and healthcare, healthcare systems engineering, mobile health, lean healthcare, and lean hospitals.


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Appendix A Questionnaire Please answer based on Strongly Agree (7), Agree (6), Somewhat Agree (5), Neutral (4), Somewhat Disagree (3), Disagree (2), and Strongly Disagree (1). Question Strategic alignment In your company, business strategies and IS/IT strategies are aligned. Top management support Organizational leadership is strong. Top manager financially supports the IT department. Top manager is committed to strategic use of IT. Top manger trusts to IT department. IT department capabilities IT leadership is strong. IT department is reliable in meeting needs. IT department efficiently keep up with technology advancement and providing innovative solution. IT department has a good credibility regards to previous projects. Organizational plan and characteristics In this company, there is a formal, written business plan with clear goals and objectives. There is an innovative culture in this company. We can say that there is a normative pressure in employing IT projects. Shared understanding between IT and business There is a proper and close relationship between CEO and CIO. There is a proper and close relationship between IT department and other department. IT department has a good knowledge about the business in your company. Top manager has a proper knowledge of IT. There is a close partnership in developing business plan and IT plan.

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