Role of information technology in leveraging performance : a study in Sri Lankan banking sector

Abstract

During the last few years, when the field of strategic management evolved, strategy researchers have shown increasing interest in the role of information technology (IT) in formulation and implementation of strategies, and its impact on financial performance. As a result, the Resource Based View (RBV) was introduced and much research was carried out on the RBV for IT. This research examines existing literature, and integrates RBV with IT, and presents the results from a new empirical study for the banking industry of Sri Lanka. The objective of this study is to research on information technology and information technology related resource complementary factors that would bring performance variance in the banking industry of Sri Lanka./ This study explains the ways in which that IT can be used as a competitive weapon by pointing out the complementary resource factors that needs to combine with IT to bring performance advantage. Here the focus is on human resource factors and organizational procedural factors that play a key role in enhancing the IT effectiveness. This is the first study carried out in the Sri Lankan banking industry to empirically specify the complementary factors that can synergy the impact of IT./ The results were obtained by using SAS/STAT statistical software. The stepwise multivariate Principal Component Analysis (PCA) was carried-out to prove the necessary hypotheses. The survey was carried out for bank population of 23 licensed commercial banks and 14 licensed specialized banks. The findings shows that IT alone have not produced performance advantage in the banking industry, but resource complementary factors when combined with IT bring a performance advantage among Sri Lankan banks. The findings of this research suggest that, owing to IT similar IT usages by competitors in the banking industry, the extensive use of IT alone have not produced performance advantage. The results supports the RBV approach, and explains why sophisticated IT users did not generally outperform less sophisticated users, but banks that combined Tim with complementary resources gain performance advantages over the others.