Chapter 1- Introduction
Information technology infrastructure happens to be the main driver for organizational improvement and technological innovation (Yunis, 2017). Understanding how IT affects the performance of a firm can help the managers know the value of incorporating IT infrastructure within an organization. IT-based HRM practices have become a common practice, particularly in selection as well as training, talent management, employee assessment, etc. Moreover, HR practices such as skill-based pay, promotion-from-within, developmental performance processes, and comprehensive training programs play a significant role in making the organization better equipped in assimilating as well as acquiring new knowledge (Pérez‐López, 2015). This transmission and acquisition of knowledge are known as absorptive capacity.
Furthermore, absorptive capacity depends on the flow of knowledge throughout the organization that is facilitated through the application of IT (Turner, 2016). This study also aims to understand the relationship between corporate entrepreneurship and information technology. Information technology supports corporate entrepreneurship by providing information related to entrepreneurial activities and building the technological environment in the organization.
Information technology is the key factor in many technological improvements and organizational development. This study investigates the relationship between IT and performance of a firm, with the mediating role of human resource management, absorptive capacity, and corporate entrepreneurship. It is the most critical research issue to understand the effect of IT on organizational performance as it helps managers to evaluate their investment in IT. There are many studies done that show the direct impact of IT on firm performance (María Teresa Bolívar-Ramosa, 2013).
IT infrastructure incorporated with HRM practices can provide better services to line managers, help in making strategic decisions, provide essential data, and enable quick acquiring and analysis of data for HR assistants (ARMSTRONG, 2002). Absorptive capacity is a firm’s ability to transform it as well as exploit the experience by integrating it into firms’ operation. Developing, as well as acquiring the firm’s human resources represents a direct link to its ability to understanding, interpret, and absorb new external knowledge (Abedin Piry1, 2013).
Business innovation and alertness depend on the amount of acquisition of new knowledge from the environment and how the market opportunities are being exploited by the organization(Yang Chen, 2015). Absorptive capacity enables the firm to absorb information and knowledge from the customers, competitors, and external environment for building better products and introducing better services, thus enhancing its corporate entrepreneurship. Corporate entrepreneurship enhances innovation and creativity in a firm, making it more competitive and increasing its performance (Zahra &Covin 1995)
1.1 Statement of the Research Problem
Performance is the degree to achieve the objective related to work. According to Cascio (2006), when employees become successful in achieving their goal that is related to jobs, then organizations become successful in achieving higher performance because employees strive to achieve the objectives of the organization. Stannack (1996) also said that many researchers use the term performance to measure output and input.
1.2 Research Aim
The aim of this research is to find out relationship of IT on firm’s performance. IT infrastructure consists of the software, networks, hardware, data centres, as well as the devices used to monitor, support, and operate IT services within a company(Turner, 2016).
Chapter 2- Literature Review
HRM practices include a set of employee management activities. These activities are subdivided into techniques and practices, which are selection, recruitment, interviews, assessment centres, pay systems, performance management systems, team working and collaboration, communication and information sharing, benefits packages, job design, HR planning, diversity, and equal opportunity. HRM is the bundle of mutually supporting practices. These activities are combining for HR systems (Paul Boselie, 2005). Human Resource Management deals with the development as well as management of individuals within the organization and helps the organization to achieve its goals and objectives. Human Resource Management practices deal with the development as well as management of individuals within the organization and help the organization to achieve its goals and objectives.
Corporate Entrepreneurship refers to the pursuit of entrepreneurial initiatives as well as actions for the transformation of the established organization through the strategic renewal of the firm’s scope as well as processes (Yunis, 2017). This includes the development of new product lines, integration in different technological areas, or targeting different market segments. A company’s entrepreneurial orientation is a result of practices, values, and decisions which the top-level management makes to shape the firm. To make sure that the firm takes advantage of the opportunities in the environment, the managers must implement such kind of culture within the organization which supports the technology. Claudio Petti is of the view that for a firm to introduce innovative technology successfully, the top managers must be able to integrate various kinds of competencies and resources such as acquiring technological skills for the development of corporate entrepreneurship (Petti, 2013).
Firm performance measurement means measuring the efficiency as well as the effectiveness of organizations’ activities. The level of profitability, solvability, liquidity, and productivity can be easily measured through the financial ratio indicator. HR practices such as skill-based pay, promotion-from-within, developmental performance processes, comprehensive training programs play a significant role in making the organization better equipped in assimilating as well as acquiring new knowledge also known as absorptive capacity(Cordery, 2017). Developing as well as acquiring the firm’s human resources, represents a direct link to its ability to understanding, interpret, and absorb new external knowledge (Abedin Piry1, 2013).
2.1 Information technology affects Corporate Entrepreneurship
IT infrastructure is related to the ability to mobilize and organize IT-related resources including and co-presences with other resources (Bharadwaj A., 2000). IT supports CE in many ways. IT infrastructure provides information related to entrepreneurial activities and build the technological environment in the organization. IT infrastructure also facilitates communication and interaction and help then to share knowledge outside the firm and improve innovation. (Yang Chen, 2015). Thus IT infrastructure is positively associated with corporate entrepreneurship. An organization’s success depends upon the application and creative use of its IT infrastructure, while Janson &Wrycza (1999) revealed that there is a highly positive relationship between IT usage and CE activities.
2.2 IT affects the Absorptive Capacity
IT infrastructure positively affects absorptive capacity, which in turn enhances organizational performance (Rico and Cohen 2005).IT infrastructure enhances the interaction between the employees through web-based sharing of knowledge, email, cloud computing, etc. which encourage the sharing as well as a collection of knowledge. These technologies help distribution of knowledge across the firm which makes the availability of useful knowledge higher, making networking within the firm faster. This enables the firm to transform, exploit, assimilate, and acquire knowledge easily (Yunis, 2017).
2.3 IT infrastructure affects Human Resource
Advancement in information technologies has led to changes in human resource management specifically in the areas of using data in the decision-making process. The HR managers are now required to know the use of IT infrastructure. IT-based HRM practices have become a common practice particularly in selection as well as training, talent management, employee assessment, etc. Thus if IT infrastructure is incorporated with HRM, it makes HR practices more efficient.
The strategies that a business uses which are linked to HRM practices tend to have a positive impact on the performance of that firm. HRM practices such as job security, recruitment, decentralization, information sharing, and team selection compensation based on performance, extensive training, etc. affect the way a firm operates and competes with its competitors. According to (ARMSTRONG, 2002), if the management at the top of the hierarchy in a firm is made aware of the valuable role of that human resource management on an organization’s business strategy, then the managers can use those HRM practices for increasing the firm performance
Numerous researches have been done regarding the impact of CE or corporate entrepreneurship and firm performance. Naman states that corporate entrepreneurship leads to the promising success of an organization. Thus most of the research done indicates that there is a direct relationship between the profitability as well as the growth of an organization and the numerous operations involved in corporate entrepreneurship. Corporate entrepreneurship can improve the learning of new competencies as well as skills and thus facilitate as well as accelerate the competitiveness of a firm and increase its performance (Zahra &Covin 1995). A firm with valuable IT resources may be able to leverage these resources to build its capability. (Hina Zafar, 2016) stated that there are positive relationships between a firm’s IT infrastructure and firm performance. Tanriverdi (2005) stated in his research that the use of IT infrastructure can build an IT-based synchronization mechanism and improve organizational performance by creating multi-departmental synergy.
IT infrastructure positively affects absorptive capacity, which in turn enhances organizational performance (Rico and Cohen 2005).IT infrastructure enhances the interaction between the employees through web-based sharing of knowledge, email, cloud computing, etc. which encourage the sharing as well as a collection of knowledge. These technologies help distribution of knowledge across the firm which makes the availability of useful knowledge higher, making networking within the firm faster. This enables the firm to transform, exploit, assimilate, and acquire knowledge easily (Yunis, 2017).
2.4 Corporate entrepreneurship and Firm Performance
There are many types of research done to study the relationship between corporate entrepreneurship and firm performance gave the result that corporate entrepreneurship leads to the development of company firm performance (Naman and Salvin 2012; Zahra, 1991, 1993; Zahra and Calvin, 1995; Kaya 2006). Most of the studies on corporate entrepreneurship (Zahra 1991, 1993; Russell & Russell, 1992) inspected the direct impact of activities of corporate entrepreneurship and orientation on the growth and profitability of the company (Antoncic&Hisrich 2014). Corporate entrepreneurship can improve the learning of new competencies as well as skills and thus facilitate as well as accelerate the competitiveness of a firm and increase its performance (Zahra &Covin 1995).
IT infrastructure is related to the ability to mobilize and organize IT-related resources including and co-presences with other resources (Bharadwaj A., 2000). IT supports CE in many ways. IT infrastructure provides information related to entrepreneurial activities and build the technological environment in the organization. IT infrastructure also facilitates communication and interaction and help then to share knowledge outside the firm and improve innovation. (Yang Chen, 2015). Thus IT infrastructure is positively associated with corporate entrepreneurship. An organization’s success depends upon the application and creative use of its IT infrastructure, while Janson &Wrycza (1999) revealed that there is a highly positive relationship between IT usage and CE activities.
2.5 Human Resource Management Practices and Corporate Entrepreneurship
According to the resource-based view, entrepreneurial resources tend to be intangible and rather difficult to understand as well as imitate (Bharadwaj A., 2000). If the entrepreneurial resources are used along with the HRM practices then the outcome of a firm’s performance can be enhanced as asserted by Hayton (2016). If a firm applies human resource management practices effectively, then the employees will feel motivated to be proactive and ill contribute towards creativity as well as innovation within the firm. However, if the effective HRM practices are not applied, the employees will lack the inclination to be innovative or to contribute towards better ideas for corporate entrepreneurship. The main indicator of the effectiveness of a firm’s human resource management practices happens to be corporate entrepreneurship as HR practices are the source of an innovative and initiative-taking culture within the organization. Thus HRM leads to enhanced corporate entrepreneurship through the increase in the performance of the employees.
2.6 Absorptive capacity and Corporate Entrepreneurship
Entrepreneurial organizations tend to capitalize and value learning because successful entrepreneurship requires organizational learning (Covin& Miles, 2015). Furthermore, business innovation and alertness depend on the amount of acquisition of new knowledge from the environment and how the market opportunities are being exploited by the organization. Absorptive capacity provides a way for the organization to discover as well as exploit the new market opportunities. Corporate entrepreneurship is involved in exploiting and exploring market opportunities. Absorptive capacity enables the firm to absorb information and knowledge from the customers, competitors and external environment for building better products and introducing better services. ‘a firm acquiresrelevant knowledge about its activities under the absorptive capacity as per Wang, firms get benefit from it because it help them getappropriate values of information through external and internal sources (Juanru& Wang, 2017).
This knowledge is then applied by firms to support business activities. According to Sweeney, it is easy to do business decisions by absorptive capacity that can enhance the firm performance (Sweeney, 2015). In technological firms, this force acts as a driver that transforms the IT into business value for the firm. This value is also important to enhance the organization’s effort to get internalize the new knowledge related to information technology. When new product development is carried out,it helpsfirms make timely decisions related to it and significantly commercialize innovative ideas. Additionally, it helps them if they can create new knowledge more efficiently than other competitors (Lin et al., 2015).
Corporate Entrepreneurship refers to the pursuit of entrepreneurial initiatives as well as actions for the transformation of the established organization through the strategic renewal of the firm’s scope as well as processes (Yunis, 2017). This includes the development of a new product line, integration in different technological arenas or targeting different market segments. A company’s entrepreneurial orientation is a result of practices, values, and decisions which the top-level management makes to shape the firm. To make sure that the firm takes advantage of the opportunities in the environment, the managers must implement such kind of culture within the organization which supports the technology. Claudio Petti is of the view that for a firm to introduce innovative technology successfully, the top managers must be able to integrate various kinds of competencies and resources such as acquiring technological skills for the development of corporate entrepreneurship (Petti, 2013).
2.7 Human Resource Management and Absorptive Capacity
HR practices such as skill-based pay, promotion-from-within, developmental performance processes, comprehensive training programs play a significant role in making the organization better equipped in assimilating as well as acquiring new knowledge also known as absorptive capacity(Cordery, 2017). Developing as well as acquiring the firm’s human resources represents a direct link to its ability to understanding, interpret and absorb new external sources.
Absorptive capacity has a positive effect on the performance of a firm
A firm that has high absorptive capacity is more likely to acquire new knowledge, opportunities, information about suppliers, channel partners, external sources, and knowledge about target market (Cordery, 2017). Thus a firm that is high on absorptive capacity is more likely to have more knowledge regarding market opportunities which means it will have higher chances of increasing its firm performance (Iyenga, 2015). The way a firm absorbs the knowledge relevant to its activities is known as absorptive capacity and according to Wang, it is beneficial for the firms because it allows them to identify the main values of information gathering through external as well as internal sources (Juanru Wang, 2017). The firms can in turn apply this knowledge to support the business activities and decisions. According to Sweeney, business decisions can be done more effectively through absorptive capacity which can in turn enhance the firm performance(Sweeney, 2015). In technological firms, absorptive capacity acts as a driver for transforming the information technology into business value for the organizations because it enhances the organizations effort to acquire as well as internalize the new knowledge gained from information technology. Thus in the context of new product development, for example, firms can make timely decisions related to product development and more effectively commercialize innovative ideas into new products if they can create new knowledge more efficiently than other competitors (Lin et al., 2015).
HRM practices have a positive effect on firm performance
The strategies that a business uses which are linked to HRM practices tend to have a positive impact on the performance of that firm. HRM practices such as job security, recruitment, decentralization, information sharing, and team selection compensation based on performance, extensive training etc. affect the way a firm operates and competes with its competitors. According to (ARMSTRONG, 2002), if the management at the top of hierarchy in a firm is made aware of the valuable role of that human resource management on an organization’s business strategy, then the managers can use those HRM practices for increasing the firm performance
Corporate entrepreneurship has a positive effect on firm performance
There are many researches done to study the relationship between corporate entrepreneurship and firm performance given result that corporate entrepreneurship leads to the development of company firm performance (Naman and Salvin 2012; Zahra, 1991, 1993; Zahra and Calvin, 1995; Kaya 2006). Most of the studies on corporate entrepreneurship (Zahra 1991, 1993; Russell & Russell, 1992) inspected the direct impact of activities of corporate entrepreneurship and orientation on the growth and profitability of the company (Antoncic&Hisrich 2014).Corporate entrepreneurship can improve the learning of new competencies as well as skills and thus facilitate as well as accelerate the competitiveness of a firm and increase its performance (Zahra &Covin 1995).
Barney uses resource based view to examine the relationship between performance of an organization and information technology. Resource based view happens to be an economical tool which indicates the strategic resources that a firm has access. These resources can then be used by the organization for achieving its objectives and for attaining competitive advantage. This theory was formalized by Barney (1991) and the idea was first introduced by Werner in 1984. Werner suggested the idea of resource position barrier. Resource based view is the theory that proposed the concept of heterogeneous firms and stated that heterogeneous firms possess heterogeneous resources. The key concept of the resource based view is that all resources should not be given equal importance because only a few resources possess the capability of having sustainable competitive advantage. Barney pointed out that one should strive to understand the relationship between the strategies which will provide success and the sources of obtaining competitive advantage. A lot of administrative effort must be put in resources into recognizing, understanding and arranging centre capabilities.
Moreover, administration must put resources into figuring out how to create an understanding of core competencies for keeping up the key assets and abilities. In the resource based view, strategists select the procedure or aggressive position that best adventures the inside assets and abilities with respect to outer open doors. Given that vital assets speak to an intricate system of between related resources and abilities, associations can embrace numerous conceivable focused positions. The main points of resource based theory include identifying the potential strategic resources of an organization and evaluating whether the strategic resources which have been identified, can fulfil the VIRN criteria. The VIRN criteria stand for valuable, rare, imperfectly limitable and non-substitutable. The resources identified should be valuable for the firm in such a way that they enable the firm to implement various strategies which can improve the effectiveness of the firm. The resource should also be rare and they should not be easily available for the competitors. The resources should be imperfectly limitable to such an extent that they cannot be developed by the competitors and they should also be non-suitable so that they cannot be replaced.
Research studies show that high level of Corporate Entrepreneurship leads to higher organizational performance. the entrepreneurial culture is not emphasized before but this is clear that the organization employees without these has to face many difficulties such as its effects the organization sense of innovation, risk taking and pro activeness with experience.
Research shows that information technological resources such as IT infrastructure, software, assets, and Information technological investment positively influence external and internal capabilities. Managers should cultivate these resources which help them enhancing core business competitive advantages. Managers should find ways that how investments made on IT projects which leads to increase in organizational abilities.
As Bharadwaj 2000 concluded that firms should find ways to increase its capabilities not simply investment made in IT.The firms should focus on the hierarchical structure which decrease the communication barriers and enables effective technology which helps in taking and distribution of knowledge. To get higher level of organization performance organizations have to focus on their recruitment, selection and information systems that helps the organization in keeping and distributing new knowledge. Organizations should focus on IT to increase the organizational efficiency and productivity. Cordery states that the manager must make collaboration with their employees by using IT in the organization (Cordery, 2017). They showed make the IT infrastructure up to date so the organization can used latest technology in order to use them as competitive advantage because most of the organizations that are leader today is because of their thinking to use IT as an advantage.
Chapter3-Methodology
This research study is qualitative in nature, a pilot study with the random sampling process is carried out to confirm the features of IT industry. Self-administered survey from different companies CEO is conducted to examine the relationship of IT with the absorptive capacity and the firm performance. The number of companies used to analyse questions and variables is confidential. Pilot study results show that data is reliable (higher than 0.70) which is the accepted range, and it is normally distributed. The comparison of different objectives was made to minimize the non-response bias among non-responding and responding businesses. The results are evident that there is no significant difference between respondents and non-respondents that is based on different questions like standard data identification, involvement of employees and approach to third party. Beside this, the Harman test is applied to remove any bias from the data. This pilot study is significant to get the results.
3.1Hypothesis of study
There are different hypothesis of study such as:
H0= Effect of Information Technology (IT) on Firm Performance
H1= relation between Absorptive Capacity and Corporate Entrepreneurship
H2= relationship between Corporate entrepreneurship and human resource management practices
H3= relationship between Corporate Entrepreneurship and firm performance
H4= relationship between HRM and absorptive capacity
H5= relation between Absorptive Capacity and firm performance
H6= relationship between HRM and Firm performance
H7= relationship between IT and Absorptive Capacity
3.2 Research Instrument
The survey instrument that is going to be used in the process of collecting data includes using questionnaire regarding Information Technology factors that will be adapted from the work of Liang 2010 and Bolivar-Ramosa 2013 (Sweeney, 2015). There will approximately be 24 items within the questionnaire in which IT infrastructure will have five items. For human resource (HR) we will use Youndt and Snells (2004) 5 item scale which includes the entire process of hiring as item 1, numerous sources of recruitment as option 2, development of employees as item 3, development of employees while using technology effectively will be item 4, and how employees recognize as well as use the infrastructure of information technology will be 5.
3.3 Sample and procedure
The population for this study is CEOs and managers from different IT units in the industry that focus on improvement of firm performance by technology adoption and absorptive capacity. The research focuses on informational technology sector to get idea about improvement in firm’s performance. On the basis of 5 item scale discussed above, IT units are selected for the research and 150 managers and CEO are considered for this study, but not all of them responded. Managerial personnel is considered for this study due to their significance in any firm. The factual assessment of variables is carried out by considering them reliable by getting information from relevant sources. CEOs and managers are provided with questionnaires to collect data. To get high and authentic response rate, 200 questionnaires are emailed, presentedand distributed. All of the personnel involved were assured of their confidentiality.
Out of 50 distributedquestionnaires, 20 were received by emails and 30 by self-administered. In these received questionnaires, 30 found incomplete and 5were abandoned due to fake response. Remaining15questionnaires were considered for final data analysis. Cluster sampling is an appropriate technique to conduct data analysis for sampling.The information gained from ITindustry sectors provided help to get insights about working conditions, firm performance and the improvement in HR. the selected industries units are involved in implementing latest technical solutions to improve employee’s management and firm performance. In addition, these industries are also reported maximum benefits in terms of employment and technical management issues. Different industry’s technical units considered comprised of, textile, sports, food, leather, and furniture technology. Among respondents, 18% were female and 82% were male.
3.4 Measure
The constructs are used in the study to measure empirical performance, which is pre-tested in prior studies. This is useful to test significance and authenticity of variables and measurable items. The prior studies confirmed use of Likert scale to analyse the variables. The seven point Likert scale started from strongly disagree (point 7) to strongly agree (point 1). This was followed by the meta-analysiswith the use of same measures, as conducted in past studies. In the next process, random sample of some relevant studies is confirmed to find out value of constructs, in relation to IT. The main aim to analyse prior studies was to find out standard methodology they used to code the variables.
The flexibility in the IT industry is based on flexible scale. Respondents were inquired about the connectivity, compatibility and modularity of IT firms. The constructs in this regard were measured on the multi item scale, on the basis of past literature. Reliability value is found out to be 0.879 which is larger than accepted value of 0.70.On the venturing scale, five items mentioned above were diversified to know the value of operation in the IT industry. This result validated the scaleperformanceunder entrepreneurial activities.
3.5 Common Method Bias
All measures and their collection was carried out from same source. Harman’s one factor test was used to find out the variance through common method. Common method variance is a key to get covariance of the constructs. Harman’s one factor test is helpful to find out potential bias in the data set. Factor analysis method in dependent and independent variable is not considered in variance.
3.6 Data collection
Prior to data collection, the questionnaire was sent to IT industry experts to find out a feedbackabout project management and IT. After the receiving of feedback, firm performance and constructs’ change in questionnaire was analysed.The question list in thequestionnaire was 13. The raw data was exported to Microsoft Excel file. Cleansed data was used to determine the composite value of get descriptive statistics. In addition, Pearson correlation coefficient was conducted to find out significance of results.
3.7 Research Action Plan
To analyse the questionnaire, frequency distribution was carried out,i.e. byseparating the response related to each category, i.e. research questions. These categories are relationship between IT and Absorptive Capacity, corporate entrepreneurship, firm performance, human resource management, and effect of IT on performance of firm. Most of thesevariables are interrelated and have causative relationship. This property of variables has make it easy to analyse all the variables and suggest direction of effect.
3.8 Ethics and Potential Problems
There are diverse sets of issues that the data collected might face, such as an issue with fluctuations in-laws, natural conditions, economy, etc. This kind of aspects might vary and influence the generalizability. Time constraints might also influence the research conducted.Organizations must be aware of the significance of this phenomenon, which is associated with the increasing importance of using information technology to develop interdependent tasks to foster interaction among organizational associates. HR practices are the source of an innovative and initiative-taking culture within the organization. Thus HRM leads to enhanced corporate entrepreneurship through the increase in the performance of the employees. Information and communications technologies, when accurately used, offer firms significant opportunities, which are why the organizations must consider information technology as a factor that supports competitiveness and increases organizational performance.
The other aspects of IT, such as IT skills, IT leadership styles, and other IT resources, should be examined, and their impact can be observed on firm performance. Moreover, researchers should examine the consequences of absorptive capacity within organizations such as staff satisfaction and improvement of quality. More studies may be needed for investigating the relationships with are insignificant and whether there are other measures that can reveal a better understanding of the rile of information technology infrastructure in increasing firm performance.
Chapter 4- Data findings & Results
4.1 Instrument Validation
Current research study has used nine main variables. The research process was validated in two steps, first was construct reliability and second was the variance of these constructs. There are 24 items in the questionnaire that were aligned on the five-item scale basis. Youndt and Snells (2004) described the 5 item scale which includes the entire process of hiring as item 1, numerous sources of recruitment as option 2, development of employees as item 3, development of employees while using technology effectively was item 4, and how employees recognize as well as use the infrastructure of information technology was 5. Construct validity was calculated on its basis by using convergent validity and discriminant validity basis(Juanru& Wang, 2017). These estimates were necessary to figure to know the consistency of data and understand the operationalization of these constructs.
Eight constructs of this research study are as follows:
H0= Effect of Information Technology (IT) on Firm Performance
H1= relation between Absorptive Capacity and Corporate Entrepreneurship
H2= relationship between Corporate entrepreneurship and human resource management practices
H3= relationship between Corporate Entrepreneurship and firm performance
H4= relationship between HRM and absorptive capacity
H5= relation between Absorptive Capacity and firm performance
H6= relationship between HRM and firm performance
H7= relationship between IT and Absorptive Capacity
Among 50 distributed questionnaire, only 15 were complete, and rest were abandoned due to incomplete information. Data analysis based on these fifteen completed questionnaires were done. To get most out of data, the hypothesis was considered as constructs and coding was assigned to the variables.
4.2 Constructs of this research
Key constructs as variables are discussed and coded as,
FP= Firm Performance
ACCP= Absorptive Capacity and Corporate Entrepreneurship
CEHRM= Corporate entrepreneurship and human resource management practices
CEFP= Corporate Entrepreneurship and firm performance
HRAC= HRM and absorptive capacity
ACFP= Absorptive Capacity and firm performance
HRFP= HRM and Firm performance
ITAC= IT and Absorptive Capacity
All values t statistics show satisfactory convergent validity. At the start, correlation in the constructs was calculated, i.e. standardized deviation and mean values of the model. The mean value and standardization calculated for the model is acceptable in range. Reliability values, composite reliability and loading standardization, is also calculated and shown the table. Composite and indicator reliability is measured and shown in table 2. Indictor reliability has a threshold value of 0.50 while composite reliability 0.70.
Table 1Standardized Loadings and Reliability Table
| Constructs/Variables | Cronbach’s Alpha | AVE | Composite Reliability | Standardized Loading |
| FP | 0.912 | 0.752 | 0.935 | 0.81-0.84 |
| ACCP | 0.87 | 0.701 | 0.921 | 0.76-0.81 |
| CEHRM | 0.88 | 0.760 | 0.92 | 0.76-0.86 |
| CEFP | 0.90 | 0.671 | 0.931 | 0.75-0.82 |
| HRAC | 0.88 | 0.712 | 0.920 | 0.71-0.79 |
| ACFP | 0.89 | 0.671 | 0.923 | 0.60-0.80 |
| ITAC | 0.879 | 0.656 | 0.913 | 0.70-0.81 |
Composite Reliability and Cronbach’s Alpha values are more than the threshold value, which is 0.7 in the constructs for the model, highlighting a measurement range is acceptable to know the reliability of any item. A complete variance of indicators is calculated by the average difference extracted (AVE), which is devised by the latent construct. Its values in this study are more than 0.50, which is above the threshold. Besides, the factor loadings are under significance level, i.e. p<0.001 so fall within the range. Holding value is significant means they are presenting convergent validity.
Standardized deviation, correlation matrix and Mean values are calculated for the constructs in the following table,
4.3 Descriptive Statistics
Table 2 Table of Descriptive Statistics
| SD | Mean | FP | ACCP | CEHRM | CEFP | HRAC | ACFP | ITAC | |
| FP | 0.86 | 6.01 | 0.866 | ||||||
| ACCP | 0.85 | 5.96 | 0.583 | 0.832 | |||||
| CEHRM | 0.90 | 5.85 | 0.543 | 0.370 | 0.831 | ||||
| CEFP | 0.92 | 5.94 | 0.561 | 0.442 | 0.543 | 0.851 | |||
| HRAC | 0.96 | 5.87 | 0.546 | 0.380 | 0.540 | 0.572 | 0.843 | ||
| ACFP | 0.89 | 5.95 | 0.564 | 0.381 | 0.563 | 0.520 | 0.542 | 0.821 | |
| ITAC | 0.88 | 5.94 | 0.562 | 0.386 | 0.512 | 0.532 | 0.534 | 0.543 | 0.815 |
AVE is helpful to show the discriminant validity, and it should be higher in all constructs than the squared correlation, under the degree by which all construct deviate. The table shows all constructs are under the acceptable range, so fulfilling criteria of discriminant and convergent validity. The chart is also showing inter-construct relationship under correlation when there is a significant value.
4.4 Hypothesis Test Result
Table 3 Hypothesis Results
| Relationship | Coefficient Value | Significance level | |
| ACCP → FP | 0.233 | *** | H1:Accepted |
| CEHRM → FP | 0.238 | *** | H2:Accepted |
| CEFP → ACCP | 0.343 | *** | H3:Accepted |
| CEFP → CEHRM | 0.577 | *** | H4:Accepted |
| HRAC → CEFP | 0.444 | *** | H5:Accepted |
| ACFP → HRAC | 0.153 | ** | H6: Accepted |
| ITAC → FP | 0.038 | * | H7: Rejected |
Note: *<0.05; and **<0.01
The table shows hypothesis results, according to the results, H1 is strongly supported meaning that absorptive capacity and corporate entrepreneurship are related and IT is strongly affected by these factors while the coefficient for this variable is 0.233, which is significant. H2 is also strongly supported by the results, that means corporate entrepreneurship and human resource management practices are key to affect firm performance; its coefficient value is 0.238. H3 is also accepted that means corporate entrepreneurship and firm performance are linked to absorptive capacity and corporate entrepreneurship, and the coefficient is 0.343, that supports the results. H4 and H5 are also accepted, showing that HRM and absorptive capacity & absorptive capacity and firm performance are playing a key role for an organization regarding improvement in organizational culture and performance, with the coefficient values of 0.577 & 0.444. Statistically significant means the value range is acceptable. H6 is accepted, which is HRM and firm performance, with a coefficient of 0.153. H7 is rejected that describe the relationship between IT and absorptive capacity with coefficient 0.038.
All the hypothesis were positive and accepted, except H7, which was insignificant. The values of data collected from the questionnaire have shown the common perception of the CEO and managerial personnel responded. Efforts related to improving an organization are related to investing in IT while many organizations do not support IT in terms of absorptive capacity and involvement in different matters. Key components of human resource management and IT are discussed in the paper. For instance, part of software and hardware understanding for employees and stakeholders play an essential role for management and to improve the firm performance. Based on collected data results, a detailed discussion is made.
Chapter 5- Discussion and Analysis
In past years, researchers have focused on exploring the impact of organizational development on the performance of firms with the help of many variables. The theory and numeric approaches are found as support for this study because evidence-based findings help describe performance outcomes. Research evidence suggested that firms’ key variables impact overall organizational performance. Drawing on literature, the current research is conducted to identify the key role of variables on the firm’s capabilities regarding IT. It has been discussed that IT capabilities and dimensions are positively influenced by integration and infrastructure. They play a positive role to enhance the performance of the firm(Yunis, 2017).
Findings of the current research study provided substantial support to literary evidence regarding firm performance. Results have shown that IT has a significant influence in the field of building organizational capacity and bringing improvement. Firm based HRM practices are increasingly influenced by IT approaches, to offer information to employees and bring compatibility(Covin& Miles, 2015). Current research has built seven constructs/hypothesis to identify the impact of IT on the performance of firms(María Teresa Bolívar-Ramosa, 2013). Results have revealed that IT-based strategies have a direct impact on the organizational atmosphere. The flexibility and IT-based integration are playing a certain role to manage business ventures as well as the firm’s performance.
Among all the variables (that show positive results/supported by research and data), one variable was found as insignificant. Results did not support it, it is likely that in some organizations, the required structure of the firm’s operations was not followed to build the absorptive capacity. It is also likely that the data collected was insufficient to support this hypothesis. According to this finding, absorptive capacity is not related to IT that can have an insignificant impact on flexibility, integration and transforming knowledge in a firm (Abedin Piry1, 2013). To that extent, the collected data from different companies CEO and managers can be linked to this result. The findings suggest that the firm should focus on key performing frames before engaging in IT-based activities.
The notion that HRM is related to firm performance, no matter whichever business company is operating is true. The insignificant relationship can highlight the worldwide business operations in companies that are not focusing on performance management but do not understand the role of IT in acquiring absorptive capacity (Zahra &Covin 1995). Reason for insignificance can be the variable nature of the industry, for instance, for this research, different units of industry like textile, sports, leather, food and furniture are considered. IT sector operating in all these industrial units has to focus on absorptive capacity, but it is not likely to be prevalent in all the organizations.
The study inferred that business innovation and alertness depend on the amount of acquisition of new knowledge from the environment and how firms use market opportunities. As in collected responses, it can be seen that not all the respondents are satisfied with prevailed practices in their firms about data sharing systems, business units and compatibility. The study investigated the concept of corporate entrepreneurship and its impact on firms’ performance. It is truly identified that the pursuit of entrepreneurial initiatives is essential for the transformation of the established organization. Corporate entrepreneurship performance is significant for organizational learning as it accelerates the firm’s competitiveness, hence performance (Bharadwaj A., 2000).
Current research has provided a dimension to understand the IT firm’s performance factors, with a specific focus on corporate learning and human resource practices. It is seen from past literature that IT infrastructure helps the company acquire innovation and learning since it identifies business practices integral to the firm’s performance. IT resources for a company are positively related to show the impact on products, services, and decision-making process. IT firms also need to establish corporate rules and standards that enhance corporate entrepreneurship and its impact on company standards (Rico and Cohen 2005). They also believe in providing a compatibility platform, which can effectively help business units. The corporate framework allows managers to do a sharable system and manage documents under audit. Training and development framework is also necessary for IT firms, to deploy new techniques, hardware and software functioning (Zafar, 2016). Most of the corporate entrepreneurship segments view learning and training a critical part for the firm’s performance (Janson &Wrycza1999).
The study allowed the understanding of the possibility that human resource practices are fundamental to consider when it comes to improving the performance of a firm. The human resource practices and management aspects are critical to understanding since they offer native support to the mechanism of growth as well as innovation. The managers target innovatory aspects under training and learning regarding new products. HRM also plays a crucial role to serve company, regarding recruiting and talent acquisition strategies. The current research study also offered evidence for HRM significance and its role to improve the IT firm’s performance. HRM practices are key to consider, when it comes to recruitment, decentralization, job security and information sharing aspects. Hierarchy of a firm is necessary to get influenced by the business strategies adopted by HR (Naman and Salvin 2012).
Results of the study show that superior IT practices are involved with better management, and absorptive capacity related to corporate performance. It is truly found out that IT firm work with HRM practices and this support is substantial when viewed in terms of perceived benefits (Bharadwaj A., 2000). The scope of understanding operates within positive influence acquired from the entrepreneurship. Literature supports this concept by illustrating the role of new competencies required to boost a firm and enhance learning. The resource-based approach is also used by authors to know the relationship between the firm’s performance and IT. This tool has been proved significant to understand the strategies that companies adopt, to manage competitive advantage (Antoncic&Hisrich 2014).
The study attempts to describe the positive impact of IT on the performance of the firm under many dimensions that fulfil the criteria. Most of the variables used for this measurement proved their relationship, and only one variable, i.e. absorptive capacity, did not fulfil the criteria of measurement. The result based evidence can conclude the role of IT in managing the firm’s performance under sophisticated technology and elements. This study has shown a unique impact of IT that performs well when it is utilized with other variables. The scope of understanding is extensive due to involvement of multi-reach variables.
Chapter 6- Conclusion
Current study investigated the effect of information technology on firm performance. To accomplish this objective, the qualitative framework for the study was devised. With the help of questionnaires, CEOs and managerial personnel from multiple industrial units were selected. Performance is the measure of any organization that helps companies get substantial support to manage efficiency. The research study identified the main hypothesis related to absorptive capacity, corporate entrepreneurship, HRM practices, IT and firm performance. To know the key relationship and impact of these variables on the firm’s performance, a comprehensive investigation was carried out.
The empirical study provided substantial support to the existing literature, i.e. current results are in accordance with past findings of researchers; only one result found insignificant. The finding predicted that information technology is a substantial driver for the performance of any firm. The scope of organizational structure is associated with key prevailed practices because these practices are determined by human resource management. For example, recruitment, training, learning, talent acquisition and different work-related activities for employees are conducted by HR personnel, so it is imperative to consider the role of information technology.
In previous studies, it was confirmed that IT is the main predictor of making the structure of the organization. The performance of the organization is likely to be affected by the implementation of current IT practices, the involvement of employees. For these companies, it is also investigated, how absorptive capacity can influence the work practices in IT firms. The main role of absorptive capacity allows employees to absorb relevant knowledge for activities, and it is beneficial for employees in terms of identification of main values, whether they are from internal or external sources. Firms truly implement this knowledge on business activities and decisions, so make an effective contribution, when viewed in terms of necessary equipment. Technological firms understand the role of absorptive capacity as it works significantly for the transformation of technology for product development.
Findings suggest that if a company identifies the role of infrastructure and investment for effective functioning, it can make significant contributions to the performance. There is a negative impact observed for companies, where required investment or infrastructure is not considered, for instance, research indicated if absorptive capacity is not fully implemented in the framework of business, IT expertise and functioning do not perform at a significant level. The HRM practices and corporate entrepreneurship have a direct impact on the firm’s performance. Yet, there should be other factors that can support it, for instance, sharing of values, product diversification and business units.
The findings of other studies conform to current research findings in terms of implementing research practices, better employment screening, talent acquisition and adoption of technical software. The evidence suggests that the use of relevant software and hardware not only enhance the efficiency of existing work practices but also set standards for business values. IT productivity allows the transformation of the existing business culture by incorporating better values and significance. If necessary software and hardware are provided to employees, to enhance their efficiency and cope up in the modern work environment, it will work on financial profitability grounds. The improved profitability ratios can be market share, growth, market value, and key operational dimensions.
To acquire the full scope of workplace expertise, human resource management is responsible for identifying core values for performance. It works with improved functionality and business aspects if employees are measured with the necessary expertise. Due to the implementation of required software and business units, IT firms experience flexibility in most uncertain environments that help bring openness to the best learning atmosphere. Mostly such firms also offer proper control to effective communication practices. IT functions empower firms to acquire the required responsibility and authority that facilitates learning. More adaptive capacity is sophisticated as it gets higher terms because it works with organizational empowerment.
Research evidence reported that IT had been one of the main antecedents to increased market share and stable sales(Naman and Salvin 2012; Zahra, 1991, 1993; Zahra and Calvin, 1995; Kaya 2006). Most importantly, with the implementation of IT software and skills, customer satisfaction is attained, when indirectly measured from HRM practices. Application of IT processing allows the organization to spread the increased flow of information among employees. This process helps organizations acquire competencies and competitive advantage. With the influence of organizational expertise, the flexible strategic report is attained when its productivity is measured. The study contributed to present some solid evidence-based results that are compatible with past research and provided a threshold for further research.
The established relationship between key variables of study like HRM practices, corporate entrepreneurship, and IT activities discussed that an IT firm could improve its performance if the necessary focus in maintained about performance outcomes. The study highlighted significant paths for IT firms, under capability dimensions and IT expertise. The current study has contributed to the existing literature by providing a perspective on IT capabilities, requirements and contributory factors for the performance of a firm. IT industry experiences a positive relationship between HRM and operations. The support of IT is inherent in all aspects of HRM practices since it works in multifaceted ways. New and existing IT practices must be ensured by firms, to boost the necessary expertise and maintain skill level in the workplace. Results discuss that IT investment should be focused in future for all the IT firms and departments since they enhance the scope of work and broaden employees’ horizons. Research has also mentioned future orientations for research related to IT firms’ performance.
6.1 Recommendations and Limitations
Research study has some limitations. The selected participants of the study are only CEOs and managers. Small sample size make results’ insights limited so deep insights are not observed. Although this sample size is considered right for such kind of survey but possible to reduce the true insights. All the participants were well informed about the nature and purpose of this study, so it is possible that some of the opinions are biased. In this study, while estimating the impact of business ventures, some of the aspects can be underestimated due to diverse IT-based activities. Another possible limitation can one-dimensional nature of the measures taken for performance.
Results of the study call for certain recommendations, for example, firms’ performance is likely to be improved by making efficient use of human resource management practices. It is also recommended that IT practices in companies should be incorporated in accordance with the absorptive capacity. This will not only improve the performance of the firm but will also manage the demand for information processing. Organizational management should make correct and appropriate decisions regarding employee recruitment and acquisition of talent. IT firms should focus on all the aspects of product development and its diversification regarding software, hardware, human resources and telecommunication.
HR practices and adaptive capacity concerning IT firms are necessary to develop human resources skills. It should be prevailed and developed in all IT firms since it will acquire new knowledge, supplier’s information, external sources and market opportunities. These activities will outperform the organizational learning and development of expertise in employees. For the current study, absorptive capacity is insignificant that highlights the necessity to work with capabilities are inherent in all the IT firms used for this study and management should focus implementing versatile techniques and involve all the employees’ sources in better assimilation of activities.
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