The Mediating Impact of IT Capabilities on the Association between Dynamic Capabilities and Organizational Agility: The Case of the Jordanian IT Sector

In recent 20 years, modern business organizations are experiencing a highly turbulent environment, where their operations and performance are strongly shaped by a wide range of factors, including technological advancements, complementary obligations, time-to-market pressures, and intense competition (Bondzi–Simpson and Agomor, 2021; Bruque-Camara et al., 2016; Harsch & Festing, 2020). This aggravating environment has elevated pressure on business organizations to continuously adjust and predestine their strategies and operational systems in ways that promote effectiveness and efficiency (Calleja et al., 2018; Chikhale & Mansouri, 2015). Under such circumstances, the most crucial and essential strategy is that organizations should develop their capabilities to willingly sense and respond to external modifications and be agile (Kushwaha et al., 2021; Vaishnavi & Suresh, 2020). Organizational agility is considered as the ambidextrous strategy of a company to react to environmental modifications, while enhancing firms’ capabilities to avail dynamic opportunities and discover new avenues (DeGroote & Marx, 2013; Harsch & Festing, 2020). Here, it is worth stating that viewing organizational strategy through the lens of the dynamic capability theory is a captivating rationale, as agility is described as a strategy essential to maintain firms’ investments that help sustain in the unpredictable and turbulent environment (Bondzi–Simpson and Agomor, 2021; Green et al., 2019; Vaishnavi & Suresh, 2020).

Consequently, the hasty pace of intense universal competition, technological development, and cursory modifications and changes in customer expectations and preferences illustrate that the firm’s dynamic capabilities should have the capacity to detect, implement, and react to the adjustments and modifications within such business environments (Harsch & Festing, 2020; Kim et al., 2011; Kushwaha & Kar, 2020a). Among those confounding factors, information technology (IT) is becoming progressively crucial (Gao et al., 2020; Kohli & Grover, 2008; Kushwaha et al., 2021). Accordingly, IT pioneers have jumped to this change bandwagon to establish immediate and comprehensive collaborative settings, consolidating the collective knowledge and resources of all partner firms in order to constitute a greater IT network resources and capabilities that generate effective response to environmental modifications (Kushwaha et al., 2021; Lowry & Wilson, 2016). This intervention and wider applicability of IT can be analyzed from the infrastructural and value-driven aspects (Han et al., 2017).

More specifically, the issues of infrastructure are typically witnessed in connectivity, compatibility, and hardware (Zhang et al., 2009), while value creation includes the issues in workflow and procedures (Athey & Schmutzler, 1995). Amid the COVID-19-induced restricted workplaces, IT interventions provide infrastructural and value creation services that can be accessed from the remote areas. The eruption of pandemic has intensified the need for organizational agility. Therefore, it has become necessary to devise framework and information systems that foster development agility for the organizations. The demand for products that can be updated by the firmware has been increased, and this has led to the rise in demand of software that can be upgraded according to the customers’ needs (Kushwaha & Kar, 2020a). Therefore, the likelihood of the outbreak of another pandemic has urged firms, governments, and populace to devote further attention to agility and resilience (Batra, 2020). Similarly, e-business proactiveness and collaborative knowledge have a greater positive role in magnifying the effectiveness of organizational agility to response to the COVID-19-led crisis (Al-Omoush et al., 2020).

Nevertheless, since the last decade, scholars have been extremely attracted toward adopting the dynamic capabilities view (DCV) in there conceptual models due to the alteration in the market needs and necessities, which is considered as an extension of resource-based view (RBV). Firms need to develop dynamic capabilities for creating, extending, and modifying the ways to enhance their opportunities to survive and prosper under challenging environments (Harsch & Festing, 2020; Helfat et al., 2007). The advancement of theoretical arguments has decomposed the dynamic capabilities of IT sector into a series of identifiable and specific routines, rather than making it an elusive concept (Zhan et al., 2018).

One crucial aspect contributing to the effectiveness of managerial interventions in turbulent environments and managers’ competence in directing a preferred agility/efficiency nexus is a better understanding of how to distinguish between uncertainty and risk (Bondzi–Simpson and Agomor, 2021; Candace et al., 2011). Organizational agility cannot be evaluated independently from a consideration of uncertainty, budgets, costs, risk, strategy, and commitment (Kozioł-Nadolna, 2020). A general framework becomes a prerequisite for managers in grappling complex and interdependent issues effectively. In the IT industry, dynamic capabilities can be separated analytically from the strategic formulation, but must be linked to the strategic direction that appears from the strategic process. A strategy that is congruent, accommodating, and cohesive of innovation is just as important as dynamic capabilities (Gupta & Gupta, 2019; Rajapathirana & Hui, 2018). Therefore, dynamic capabilities need to be developed and implemented mutually while capabilities and strategy can be analytically separated.

Here, it is worth mentioning that this domain of knowledge has received considerable attention of both practitioners and academics in the last 20 years. However, much of the work has been conducted in the context of adaptability, alignment, resilience, and agility. Although the recent evidence has highlighted the need of dynamic capability variables in different contexts, the role of these resources has received scant attention and has not been examined for organizational agility (Dubey et al., 2021). Further, a broad review of the existing literature will substantiate an apparent lack of understanding and evidence regarding the concept and dimensions of dynamic capability (Feizabadi et al., 2019; Tan et al., 2015). Thereby, researchers need to, comprehensively, investigate theories regarding any causal associations anticipated between practices, performance, and capabilities by examining the indirect effect of other contextual factors. In addition, there is a significant gap in the portrayal of the particular procedures integrated by IT managers for learning internal business requirements and codifications (Kar et al., 2021). Further, the topic of IT capabilities and their impact on the performance of the IT sector in developed countries is extensively debated (Brusset & Teller, 2017; Yu et al., 2018). However, limited studies have focused on the role and prominence of dynamic capabilities with reference to organizational agility in settings and circumstances that represent emerging economies like the Middle East (Yu et al., 2018; Zhan et al., 2018).

It seems rational to state that the association between various aspects of dynamic capabilities (sensing, seizing, and transforming capabilities) and organizational agility follows concomitant paths and reflects implicit mechanisms. Therefore, we evoke IT capability to serve as a mediator between dynamic capabilities and organizational agility. In this essence, the integration of technical resources inside and outside an organization is primarily influenced by the IT infrastructure (Adikari et al., 2021). For instance, there is a significant reduction in the operational costs due to rapid growth of cloud computing, which is beneficial for IT firms, as they can integrate technical resources using cloud-based shared resources (Bruque-Cámara et al., 2016; Taghavifard & Majidian, 2022). A firm with adequate IT infrastructure will be more capable to strengthen the association between supply chain capabilities and organizational agility. Thereby, IT firms become more responsive and adaptive as their infrastructures develop foundation of information in the supply chain to fulfill the operational needs (Mikalef & Pateli, 2017; Shukla, Sushil and Sharma, 2019). Further, the operational performance and supply chain visibility are expected to be enhanced based on inter-organizational enterprise information systems (Liu et al., 2013). Along similar lines, the agile performance of IT firms depends on the reinforcement of Internet-enabled technologies (Yusuf et al., 2004). Advanced sets of IT capabilities are promoted based on the IT infrastructure. Previous studies have also treated IT infrastructure as the foundation that enables coordination of operations across the supply chain via the integration and synchronization of information and improvement in responsiveness toward customers (Adikari et al., 2021; Kushwaha & Kar, 2020a, 2020b; Kushwaha et al., 2020; Lee & Whang, 2004; Lu & Ramamurthy, 2011). That is, alignment holds substantial importance in improving firm performance (Shukla et al., 2019). Therefore, it has become yet another front to be achieved in the IT sector (Cheng et al., 2018). Taking the above together, it seems theoretically rational to propose a mediating role of IT capabilities on the dynamic–agility association.

Therefore, this study aims to fill the gaps found in previous studies and add to the current state of knowledge on this domain of organizational agility by investigating the impact of dynamic capabilities on organizational agility, along with examining the mediation influence of IT capabilities. The study also outlines different environmental settings facilitating worthiness of IT-enabled dynamic capabilities. The majority of the previous research attempts have concentrated on examining the attributes of agility (Appelbaum et al., 2017a, 2017b; Gao et al., 2020). Flexibility, culture of change, speed, integration and low complexity, mobilization of core competencies, responsiveness, high-quality and customized products have been considered as attributes or characteristics of organizational agility in previous studies (Sherehiy et al., 2007). This study examines whether these dynamic capabilities are substantial in the strategic management and business management areas, and whether new sustainability narratives are effective from the perspective of dynamic capabilities to strengthen IT infrastructure at the cluster level. In particular, there is no collective accord regarding the organizational agility features. The fundamental constructs have not been appropriately operationalized as the emphasis of dynamic capabilities has mainly been on the consideration of theoretical underpinnings.

More specifically, the contribution of this study is quadruplicate. Firstly, the study has developed a theoretical framework for studying the association between organizational agility and dynamic capability. This association has not been evaluated in the literary articles with reference to their effects in the IT sector based on dynamic capabilities. Secondly, this study expressively seeks enriching the information technology literature by offering guidelines on the roles of organizational agility in improving firm’s social, economic, and environmental performance. Thirdly, this study assists IT managers to understand the role of different aspects of dynamic agile practices within their organizations from the practitioners’ perspectives. This study assists IT-enabled organizations in inventing new methods and procedures to develop improved organization capabilities according to their rivals. Finally, the knowledge domain of IT capability and its impact on the performance of the IT sector in developed countries is extensively debated and examined (Brusset & Teller, 2017; Yu et al., 2018). However, limited studies have focused on the role and prominence of dynamic capabilities conducive to organizational agility in the context of emerging economies (Yu et al., 2018; Zhan et al., 2018). Thus, establishing a research line and discourse that cover this domain of knowledge in the Middle Eastern professional context seems beneficial.

Based on the above, this study intends to answer the following research questions:

The advancement of technologies like virtual reality (VR), artificial intelligence (AI), Internet of things (IoT), machine learning (ML), cloud technologies, and data analytics has been rapidly evolving (Taghavifard & Majidian, 2022) and, hence, affecting the labor market. As new technologies boom, the presence of such rare talents and competencies becomes a huge confrontation for organizations to handle in the current orientation toward digitalization. This pushes the companies toward devising ambidextrous strategies through constant internal development of talents to respond to the imminent necessities, while utilizing talents for the ongoing projects. The success of a company’s strategy in enhancing human capital and skills relies on the dexterous behaviors generated by the workers who display high levels of passion toward learning and talent acquisition (Kar, et al., 2021).

Accordingly, IT firms are currently involved in major supply chains that use IT as a cost-effective tool bridging the gap between the components of supply chain (Fainshmidt et al., 2016; Shukla et al., 2019). Capitalizing on resources and best practices of partners might help firms in improving their performance (Liu et al., 2013). The concept of dynamic capability of a firm in resource-based view (RBV) has drawn the attention of many scholars who consider it as a major driving force behind the exceptional performance of a firm (Mikalef & Pateli, 2017). Organizational abilities can be explained as the competence of a firm to manage complex human resources essential for accomplishing a desired corporate performance (Harsch & Festing, 2020). Dynamic capabilities assist IT firms to align and harmonize with the external environment. The main challenge faced by these firms lies in the alignment of operational and dynamic capabilities (Helfat & Winter, 2011). The core objective of the RBV is that the competition of companies should be based on the resources and capabilities (Barney, 2001; Rumelt & Lamb, 1984; Wernerfelt, 1984). Many strategic issues have been investigated influentially and purposefully through this inward-looking approach with respect to the situations that demand diversification (Wright et al., 2001).

The distinctiveness of the current study lies in providing explanation on dynamic capabilities from a hierarchical viewpoint. Superior performance cannot be delivered alone by the IT infrastructure; it is, rather, delivered by the assimilation of supportive functions that include supply chains, warehousing, delivery, and logistics (Yu et al., 2018). The expansion of operational capabilities such as organizational agility and sourcing flexibility is supported by inter-organizational information management capabilities (Bondzi–Simpson and Agomor, 2021; Gao et al., 2020).

This study suggests a novel progression to the current research endeavor exploring the influence of IT capabilities on organizational agility in the IT sector. More specifically, the current study has used the perspective of dynamic capability to explain the significance of organizational agility in the IT sector. The study suggests that dynamic capabilities of IT firms play an important role in identifying the value of IT resources, which needs to be mobilized across the value chain. In the contemporary business world, the IT sector needs to be equipped with necessary technical resources required to integrate strategic business units with their stakeholders (Gao et al., 2020). Toward that end, professionals were approached from the supply chain management and operational departments of IT firms operating in Jordan. The study findings indicated positive associations between infrastructure, digital investments, dynamic capabilities, and organizational agility. More precisely, IT capabilities significantly and positively mediated the relationship between resource-based dynamic capability and organizational agility. This implies the need for managers to understand the concept of dynamic capabilities in order to design plans that are formulated for boosting competitive performance (Curtin et al., 2007; Gao et al., 2020). This also involves seizing the right opportunity, identifying the major factors for enhancing growth, and sensing incoming openings (Harsch & Festing, 2020). With dynamic capabilities, firms will be able to satisfy customers’ requirements, effectively interact with their partner firms, and assess internal routines (Adikari et al., 2021; Kushwaha & Kar, 2020a, 2020b).

The findings also indicated that a stable organizational agility instantly improves services and routines, which recommends that enhanced services should be given the optimum preference for customer satisfaction (Adikari et al., 2021; Kushwaha & Kar, 2020a, 2020b). In addition, firms should be adaptable enough to easily adjust and respond to unanticipated modifications. More specifically, knowledge management and industrial intelligence are key innovations that enable managers to seize meaning from the collected data that can be used to create massive data warehouses (Chen et al., 2012). Thus, the organization’s ability to be agile and responsive to market changes is further enhanced. This, in turn, will help in making accurate decisions that further promote organizational effectiveness and efficiency (Curtin et al., 2007).