Abstract

     This paper explores the role that IT capability (IT-c) plays in firm innovation performance through the channel of organisational learning (OL) in Kenya. It frames OL in two dimensions: explorative and exploitative OL. The former entails seeking new knowledge, which mainly exists outside the firm’s competence. The latter is an activity or process that builds on existing competence and knowledge in the firm. Using mediation analysis of 481 firms drawn from the World Bank Enterprise Survey (2013) and Innovation Follow-up Survey 2014, it demonstrates that IT-c has a significant effect on innovation performance of firms (capability to simultaneously improve products, processes, organising and market development). It finds that the mediative role of OL in the relationship between IT-c and innovation performance is realised mainly through explorative learning, whilst enabling the firm exploit existing (in-house) knowledge base. The paper puts forward some managerial, policy and further research suggestions.

Introduction

     Information technology (IT)Footnote1 is changing how businesses are conducted and holds promise for firms. The deployment of IT in business is evident in the shift in business activities towards its use to create value in new ways for the firm and customers (Gobble, 2018). Whilst recognition of the adoption of IT amongst firms is not an issue, the fundamental questions arise in the empirical establishment of the business value of IT and the mechanisms through which it is realised in firms (Kuusisto, 2015). The business value or performance effect of IT refers to its benefit(s) for firms as may be captured in various ways, for example improvement in product development and process improvement, return on asset or any economic added value for the firm that derives from IT (Bharadwaj, 2000). In the context of this study, the business value of IT in focus is the contribution of IT to “product, process, organisational and marketing improvement”, for which this study applies the term innovation performance.

     Earlier studies provide evidence for the performance effect of IT (Bharadwaj, 2000; Wade & Hulland, 2004). However, it is insufficient to identify its direct impact on firms, without the complementary resources that account for the impact (Brynjolfsson & Hitt, 2000). Lee et al. (2014) support this position. They argue that there is evidence for the effect of IT on firms, but “we still have limited understanding about the process through which IT contributes to business value” (p. 111). This is rooted in the thinking that IT has little or no significance for firms if not integrated with firms’ resources and processes. An established firm process that accounts for differences in firms’ performance is organisational learning (OL).Footnote2 Accordingly, Tippins and Sohi (2003) argue that OL could be a missing link in the business value of IT. OL is important because it is a source of competitive advantage. Firms that learn are able to gather information about the market and tend to be more flexible hence can respond to changes in the business environment (Jiménez-Jiménez & Sanz-valle, 2011). Such firms are also able to build on their existing knowledge and modify internal practices to improve product development, process and find new markets. This positions OL as a key mediator of the impact of IT on firms.

Conclusions and Reflections

     This study sets out to explore the role that IT capability (IT-c) plays in firm innovation performance through the channel of organisational learning (OL) in Kenya. It establishes that IT-c has a significant effect on innovation performance of firms, enhancing their capability to simultaneously improve products, processes, organising and market development. This effect is mainly realised through the OL orientation of firms. It finds that the mediative role of OL in the relationship between IT-c and innovation performance is realised mainly through explorative learning in form of research-oriented and experimentation-oriented learning whilst enabling the firm exploit existing knowledge. The study has managerial and policy implications.

     Top management who make decisions on investment in IT such as software acquisition, website development and other shared platforms and IT skills should think of integration with internal processes. IT-related investment and activities must take into account the competence and practices that encourage research, staff training and re-using knowledge for innovation. The business value of IT lies in its capability to enhance these activities and practices. Investing in IT infrastructure whilst keeping organisational culture that discourages new ideas can weaken the expected outcome.