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International Journal of Information Management 28 (2008) 366378 www.elsevier.com/locate/ijinfomgt

Aligning information technology and business strategy with a dynamic capabilities perspective: A longitudinal study of a Taiwanese Semiconductor Company
Ruey-Shun Chena, Chia-Ming Sunb, Marilyn M. Helmsc,, Wen-Jang (Kenny) Jihd
Department of Information Management, China University of Technology, Taiwan Department of Accounting, National Yunlin University of Science & Technology, Taiwan c Dalton State College, 650 College Drive, Dalton, GA 30720, 706-272-2600, USA d Department of Computer Information Systems, Jennings A. Jones College of Business, Middle Tennessee State University, USA
b a

Abstract Strategic alignment involves the development and reconguration of information technology (IT) to support business strategies. This paper applies the dynamic capabilities perspective to analyze the strategic information system alignment process. The paper further argues the approach is constructive in understanding and overcoming difculties in achieving and sustaining alignment. From a longitudinal case study of a semiconductor company in Taiwan, the results show an unaligned strategic information system (with an implemented IT strategy that varies from the intended IT strategy) impedes the development of IT. Path dependence, or the implications of prior IT decisions, is another barrier for alignment. A broader view of intended alignment, focusing on IT combined with clear business vision, can be benecial for adding future IT resources. In addition, dynamic capabilities, which are critical for the creation and strength of IT resources, positively inuence the alignment process and its future implementation success. r 2008 Elsevier Ltd. All rights reserved.
Keywords: Strategic alignment; IT; Dynamic capability perspective; Case study; Information strategy

1. Toward a process model of strategic alignment Managing information technology (IT) can be conceptualized as an issue of aligning organizations with their IT to gain competitive advantages (Reich & Benbasat, 2000). Researchers agree strategic alignment, or the t between business strategy and IT is the most signicant issue facing IT (Bergeron, Raymond, & Rivard, 2004; Brown & Magill, 1994; Burn, 1993; Reich & Benbasat, 1996; Sambamurthy, Bharadwaj, & Grover, 2003; Teo & King, 1997). Prior studies have found that IT alignment continuously varies with changes in the environment, strategy, organization structure, or technology itself. Therefore, achieving and sustaining strategic alignment is difcult and often
Corresponding author. Tel.: +1 706 272 2600; fax: +1 706 272 4525.

E-mail addresses: chen1868@gmail.com (R.-S. Chen), sunjm@yuntech.edu.tw (C.-M. Sun), mhelms@daltonstate.edu (M.M. Helms), kjih@mtsu.edu (W.-J. (Kenny) Jih). 0268-4012/$ - see front matter r 2008 Elsevier Ltd. All rights reserved. doi:10.1016/j.ijinfomgt.2008.01.015

frustrating (Grant, 2003; Sabherwal, Hirschheim, & Goles, 2001). In prior strategic alignment studies, scholars sought ideal alignment patterns among the various organizational elements (Bergeron et al., 2004; Chan, Huff, Barclay, & Copeland, 1997). This approach usually focused on strategy formulation but often neglected strategy implementation. Other alignment studies have been criticized because they focused only on resulting business performance and not the alignment implementation process (Van Der Zee & De Jong, 1999). Hirschheim and Sabherwal (2001) agree the difculties in achieving and sustaining alignment have been largely underestimated. Scholars had regarded strategic alignment as an on-going process and not as a short-term program with a beginning and an ending date (Henderson & Venkatraman, 1993; Sabherwal et al., 2001). Others agree that strategic planning for IT requires evolutionary approaches tailored to organizational needs at different stages of business growth or life cycles.

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The goal of the strategic alignment process, however, remains and is to evaluate or recongure organizational assets, resources, and competencies to aligning IT strategy with business strategy. The strategy formation and implementation is a gradual process requiring different competencies over time (Montealegre, 2002). Thus, the process of strategic alignment encompasses the process of resource development and accumulation for integration. From the view of resource development, it is critical to recongure IT resources for changing external business environments. For this reason, the developmental of IT could signicantly inuence the process of strategic alignment, but has been overlooked in prior research. This leads to the research question posed by this studyHow does an organization develop IT to effectively deploy resources and achieve strategic alignment? 2. The alignment process with the dynamic capability perspective Mintzberg (1978) argues strategy has at least two different meaningsone take strategy as a plan (strategy-as-intend) and another take strategy as a pattern (strategy-as-implemented). In prior studies, scholars measured the level of strategic alignment between executives and IT managers (Bergeron et al., 2004; Burn & Szeto, 2000; Byrd, Lewis, & Bryan, 2006; Reich & Benbasat, 1996, 2000) to understand their commitment to business and IT objectives. These studies treated alignment as intended and lacked a thorough analysis on actual or implemented business strategy and IT alignment. Nevertheless, the intended alignments are not always realized in practice (Hirschheim & Sabherwal, 2001). Thus, we argue the meanings and related activities of strategic IT alignment can be explained by intended alignment in short-term periods as well as by past patterns of alignment (implemented alignment). The intended alignment occurs as planning and discussion for alignment takes place. In this stage, organizations are usually at the low implemented alignment stage. Next the strategic alignment processes occurs through continuous adaptation and organizational change so intended alignment is realized as implemented alignment. Following the strategic alignment process is implemented alignment. Here activities link both organizational processes and IT infrastructure (Brown & Magill, 1994; Henderson & Venkatraman, 1993). The three stages of alignment operate repeatedly because alignment is a moving target. As shown in Fig. 1, organizations are continuously attempting

Intended alignment

Strategic alignment process

Implemented alignment

Fig. 1. Perspectives for analyzing strategic IT alignment.

to achieve or maintain alignment. Strategic alignment may only exists for a short time period after ongoing adjustments among organizational elements are made (Jarvenpaa & Ives, 1993). Today, IT is a critical resource supporting daily operations within organizations. IT strategy should direct managerial activities toward integration with IT resources. Exploiting IT and its functionality can be a distinct resource for IT strategy planning (Byrd et al., 2006; Henderson & Venkatraman, 1993). From the resourcebased view of the rm, IT assets are rm specic. IT competencies are controlled and used by rms to develop and implement strategies (Barney, 1991). While the strategic value of tangible IT resources (i.e., systems, hardware, software) has often been questioned (Carr, 2003); intangible IT abilities (i.e., a rms ability to integrate, build, and recongure IT assets to match business developments and environmental changes) are considered critical for IT effectiveness (Feeny & Willcocks, 1998; Santhanam & Hartono, 2003). Few studies on the resource-based view of IT have addressed how a rm develops, manages, and deploys IT resources to support the alignment between IT strategy and business strategy. The dynamic capabilities perspective (Teece, Pisano, & Shuen, 1997) is an extension of the resource-based view focusing on the strength and competency of resource reconguration. This perspective has been widely accepted in the business strategy literature (Eisenhardt & Martin, 2000; Winter, 2003; Zollo & Winter, 2002) but is generally unknown in the IS literature. The perspective posits that the development of dynamic capabilities is limited by a rms existing resources and is shaped by its current market position and history of developing past resources (Grant, 1996; Montealegre, 2002; Teece et al., 1997). The resource-based view tends to dene resources broadly, to include assets, knowledge, competencies and capacity. It emphasizes the properties of resources are valuable and rare and cannot be imitated or substituted. Compared with the resource-based view, the dynamic capability perspective focuses on adapting, integrating, and reconguring skills, resources and abilities. In particular, the dynamic capability perspective emphasizes the capacity to renew competences to achieve congruence with changing environments (Teece et al., 1997). Because dynamic capabilities are further dened as a set of specic and identiable processes, they are the antecedent organizational and strategic routines to create, adapt and combine other resources into new sources of competitive advantage. The theoretical framework rst identied by Teece et al. (1997) describes the dimensions of dynamic capabilities which include processes, positions, and paths as shown in Fig. 2. Processes describe the patterns of practice and learning in a rm; positions are the technological assets, intellectual property and complementary assets; and paths refer to the strategic alternatives available to organizations, which are inuenced by current positions, processes and

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future paths. The impacts of history and exogenous change on paths are classied by Teece et al. (1997) as path dependencies and technology opportunities. Path dependencies indicate the inuence of previous positions on strategic decisions while technological opportunities are areas of organizational changes led by technological opportunities in industries and innovative internal activities. The literature on dynamic capabilities highlights the process dimension, which can often alter or recongure an organizations structure or procedures. Dynamic capabil-

Positions Tangible assets Intangible assets Human assets

Processes Integration Learning Reconfiguration

Paths Path dependences Technological opportunities

Fig. 2. Dimensions of dynamic capabilities.

ities rest upon many organizational routines, which are tacit and often difcult to replicate. Typical routines categorized by resource integration, reconguration, and acquisition and elimination are listed in Table 1. While the initial research by Teece et al. (1997) outlines the dynamic capabilities perspective, the authors did not provide empirical evidence to support the relationship between these resources and strategic planning, especially for strategic alignment. In addition, some researchers advocate that dynamic capabilities, which deploy and recongure IT resources, are signicantly related to other IT abilities (Bhatt & Grover, 2005). The dynamic capabilities perspective is similar to the coevolutionary approach manifest in biology and the study of natural sciences. In this context, the term is used to explain the mutual evolution between two or more species. Each species in co-evolution exerts selective pressures on the other to inuence or affect the evolution of both. The IT co-evolutionary processes take place in rms based on their relationship with markets. For example, Van Den Ende, Wijinberg, Vogels, and Kerstens (2003) found the coevolution phenomenon to exist between the way rms organize their innovative activities and the dynamics of markets, especially those having bandwagon or network effects. Others have studied the co-evolution approach in sustainable development (Rammel, McIntosh, & Jeffrey, 2007), in transition economies (Suhomlinova, 2006), joint ventures (Inkpen & Currall, 2004), and in the evolution of values and valuation in systems (Farrell, 2007). Even though they arise from different disciplines, the dynamic capability and co-evolutionary theory are analogous in the timing of change that happens simultaneously or congruently.

Table 1 Categories of dynamic capabilities Dynamic capability Resource integration Organizational routines Description

 Product/system development routines  Strategic decision making for resource

integration

 Some dynamic capabilities integrate resources, such as

managers combining various expertise to make choices for organizational changes, create products, or systems

Resource reconguration

 Routines for knowledge replication and    

brokering Resource allocation routines Knowledge creation routines Resource evolution routines Resource transformation routines

 Some dynamic capabilities recongure resources within rms,  

such as managers replicating, transferring, and distributing knowledge assets Some dynamic capabilities involve resource evolution routines, which enable the adaptation of existing capabilities and capacity Other dynamic capabilities involve resource transformation routines, which enable learning from a combination of both internal and external sources

Resource acquisition and elimination

 Alliance and acquisition routines  Resource elimination routines

 Some dynamic capabilities involve alliance and acquisition 

routines that bring new resources into the rm from external resources Some dynamic capabilities involve resource elimination routines that discard resources no longer providing competitive advantages

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Most IT researchers adopt the resource-based view and consider IT as the assets organizations own. The dynamic capabilities of renewing or adapting IT have not been fully analyzed in the literature. The dynamic capabilities perspective can aid the understanding of how rms develop IT and align with business strategy. This paper argues that developing IT is important for strategic alignment. The concepts emphasized by the dynamic capabilities perspective are complementary with the process view of strategic alignment. In new ventures and entrepreneurial start-ups with immature IT, developing IT could be the critical factor for their alignment processes. During a rms growth, external and internal environments both demand continuous alignment. This alignment process, seen as a set of dynamic capabilities, serves to differentiate an organizations operations from competitors by leveraging IT resources. Thus, from an IT perspective, the development process of IT can be seen as a dynamic capability that recongures specic IT assets to support other core resources. From the executive management view, the entire alignment process could be regarded as a set of dynamic capabilities leveraging IT to shape and support the rms business strategies. The research questions in this study are thus summarized as following: (1) How has intended alignment inuenced the constructive process of IT resources? (2) How has the dynamic capability perspective supported the alignment process between IT and organizational strategies? (3) How has the strategic alignment process inuenced the implemented alignment?

name. Actual details are used but to protect the companys privacy, we are using the pseudonym SEMI Corp. The semiconductor industry is a high tech industry experiencing escalating complexity, uncertainty, and acute information-processing challenges (West & Iansiti, 2003). With growing risks of operating a vertically integrated company, most industry players dedicate themselves to only part of the process. The relationships among partners within the value chain are continuously evolving with new entrants and technological innovation. It is complicated for IT managers to align with unstable organizational structures, changeable processes, and temporary or varying strategies. Thus, the entrepreneurial process of a semiconductor company is appropriate to address this studys research questions. Within the case study company, changes in both business and IT strategies and structures were examined over eight years. The collection of multiple types of data from a variety of sources is necessary to provide triangulation and increase reliability. Other historical, secondary, documentary evidence was collected from internal company records during four site visits to SEMI Corp. in August 1999, July 2001, February 2003, and June 2004. The events were studied retrospectively through intensive, non-directed interviews with top executives, IT management, 10 members of middle management, 8 IT staff members, and 15 project members from IT implementation. Interviews, totaling more than 62 h, were formally recorded with extensive case notes were made from informal conversations and observations while on-site. 4. SEMI Corp. and the strategic alignment process Founded in 1997 by semiconductor industry veterans, SEMI Corp. was an early pioneer in Taiwan providing advanced integrated circuit packaging services such as wafer-bumping, tap carrier packing (TCP) and chip on glass (COG). SEMI Corp. is located in Taiwans Hsinchu Science-Based Industrial Park, the location of numerous integrated circuit (IC) design companies, wafer fabrication foundries, and packaging/testing operations. The geographical industry cluster makes one-stop shopping available for customers. SEMI Corp. provides turnkey solutions of advanced IC package services, especially for display drivers for the IC industry. Usually, integrated circuit packaging is the nal stage of semiconductor device fabrication and this manufacturing process in considered a mature technology. However, these advanced integrated packaging technologies providing by SEMI Corp. are the critical parts of turnkey solutions, applied in super twisted nematics (STN), thin lm transistors, plasma display panels (PDP) and associated integrated circuit display drivers. Due to industry demand, SEMI Corp. has grown to be an international industry and technology leader with several branches located in the US, China, and Europe as well as their headquarters in Taiwan.

3. Methodology and data collection Because the purpose of this study is to increase understanding of the creation and development of IT, particularly the interactions within the IT strategic alignment process, complex organizational context is necessary to best study this process. The rich, often sensitive data required for the research encompasses a process view along with the study of multiple embedded units (Yin, 2003). Thus, this study utilizes a naturalistic research approach. A qualitative, interpretive, research strategy was selected and a single longitudinal case study was employed. Moreover, the focus of this study was on the events associated with changes in the alignment processes over time. To understand the thought processes underlying major decisions, it was essential to incorporate the perspectives of both senior business executives and IT executives. The company selected for this case study is a semiconductor company focusing on advanced integrated circuit packaging technology. As promised from the outset of this multi-year study, we have disguised the company

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Characterized by a high level of entrepreneurship, SEMI Corp. was managed in an ad hoc fashion with few organizational controls. To align organizational strategy and support daily departmental operations, the IT staff utilized numerous IT projects, operating continually and concurrently. These projects included enterprise resource planning (ERP), manufacturing execution systems (MES), decision support systems (DSS) with business intelligence (BI) technology, and business-to-business (B2B) data exchange systems. The case covers 1997 through 2004 when the companys net worth grew rapidly from $20 to $433 million and employees rapidly increased from 50 to over 1400. The strategic path of SEMI Corp. was divided into four lifecycle stages based on the lifecycle model for high-technology organizations developed by Hanks, Watson, Jansen, and Chandler (1993). This lifecycle model is a compilation from 14 lifecycle models from the literature and presents a methodology for empirically operationalizing the organization life cycle. In particular, the model provides the empirical identication of congurations suitable for high-tech companies with rapid growth (Burn & Ash, 2005; Wheeler, 2002). Interestingly, the life cycle theory has been applied to products, companies, industries, technologies and a host of other patterns of beginning, growth, maturity and decline since it was initially proposed in the mid-1960s (Hill, 2007). Although the value of the lifecycle theory as a predictor is sometimes questioned, it does offer a useful model for managers to consider descriptions and is utilized in this research to link IT into various growth stages. Using the lifecycle stages and methods of classication identied in prior research (Burn & Ash, 2005; Wheeler, 2002), the authors coded SEMIs stages based on organizational size, structure, formalization, centralization, and business tasks. These include: (1) the start-up stage (19971998), (2) the expansion stage (19992000), (3) the

consolidation stage (20012002), and (4) the diversication stage (20032004). The characteristics of SEMI Corp. are listed in Table 2. In the discussion below, which follows lifecycle stages, the dimensions of the dynamic capabilities perspective (from Fig. 2) were coded by the authors and are listed in italics following each key event. 4.1. Period I (19971998): the start-up stage In the start-up stage, the manufacturing process was often variable and the product quality still unproven. Like most start-ups without a stable cash ow, SEMI Corp.s strategy was one of lowering costs. In addition to limited revenue leading to inadequate budgets, each department became an isolated island of information and did not integrate with other departments or within the IT infrastructure (Positions). Because each functional areas information systems operated separately, problems arose. As the former IT manager mentioned: The IT department had only one staff and was perceived as a non-strategic function with an insufcient budget. The task of the IT staff was only to maintain personal computers and local networks. In this lifecycle stage, the IT requirements were lowerlevel technology skills, focusing solely on maintaining simple IT applications. Although they lack respect from executives, the IT staff worked to understand the manufacturing process of SEMI Corp. and then built a small MES system to t the specic internal requirements (Processes: Resource Integration). 4.2. Period II (19992000): the expansion stage In 1999, several large customers recognized the quality of wafer bumping and orders and production yields increased. Based on predictions of a growing market and rapid expansion needs, SEMI Corp. expanded its capacity,

Table 2 Summary of SEMI Corp.s lifecycle stages Stage Size by revenue (in US dollars) Revenue growth rate Staff size (s) Staff growth rate (%) Structural form Formalization Centralization Business tasks Start-up (19971998) $0.7 million N/A 50 N/A Simple Informal Highly centralized by the founder Identify niche; obtain resource Expansion (19992000) $35 million 50 300 6 Departmentalized Formal systems emerge Centralized; limited delegation Volume production; capacity expansion; set up operating systems Consolidation (20012002) $57 million 1.63 800 2.67 Departmentalized Formal control systems are enforced Moderately centralized Make the business protable; establish management control systems Diversication (20032004) $126 million 2.21 1400 1.75 Divisional Formal, bureaucratic Decentralized Expansion of the product and market scope

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acquiring capital from the sale of equity and exploring additional integrated circuit package technology. The executives recognized the necessity of IT integration and requested the IT manager build the appropriate infrastructure and application systems. However, the executives adopted the enterprise requirements planning (ERP) systems without deliberation on unique requirements or its appropriateness. The selected ERP system was unsuitable for SEMI, particularly since the ERP vendors were unfamiliar with the semiconductor industry. The rst IT manager quit and the second selected outsourcing as the new IT strategy, adding and implementing new information systems on a gradual basis to reduce the burden of the IT staff and minimize risk from radical organizational changes. The previous isolated applications in each department were replaced by the integrated ERP system (Processes: Resource Acquisition). The IT staff and users learned the necessary ERP knowledge from the consultants. At the same time, the previous in-house MES system was used to monitor daily manufacturing processes, but the system, which was based on a small DBMS, suffered from inefciency and unreliability (Paths). A new MES implementation project was outsourced to replace the in-house system (Processes: Resource Acquisition and Elimination). Although the entrepreneurs recognized IT as a necessary component for the growing company, they paid little attention to IT strategy. SEMI Corp. instituted a small, centralized IT department isolated from the other business functions. As production quality increased new staff was added but most employees were new and unfamiliar with their jobs. Specifying IT requirements while implementing the ERP system became an extra burden. There was lack of participation from top management and IT implementation was difcult. The new (second) IT manager remarked, I used a very soft style of implementation, meeting with each department, modifying the systems based on their requirements, and bringing the systems on-line according to an accepted schedule. Many colleagues worked overtime and tried to reduce their load as much as possible (Processes: Resource Integration). With the initial centralized structure and the addition of employees from many different companies and backgrounds, SEMI Corp. had few standards and minimal concerns for proper record keeping. It was difcult for the IT staff to integrate the operational procedures, particularly with the disjointed applications and inappropriate mix of outside IT consultants (Paths). The process was lengthy and slowed system customization and process adaptation. Although the executives provided nancial support when they faced IT implementation difculties, they failed to realize the importance of IT strategy during the expansion stage. Because IT managers were not included in overall strategy planning sessions, the IT department lacked sufcient time for responding to the changing organization. The quickly built IT infrastructure could not support the information requirements of the rapidly growing organiza-

tion. In particular, the outdated intended alignment caused shortsightedness and the resulting inappropriate IT decisions and resources broadened the impact of path dependence. 4.3. Period III (20012002): consolidation stage In 2001, the new plant was completed and externally new competitors emerged. The supply of LCD monitors exceeded demand during the period. Remaining customers wanted improved quality at the lowest prices. In addition, with the low yield of their newly developed integrated circuit package service, SEMI Corp. grew slowly and experienced much competition. While the situation was difcult, it gave SEMI Corp. time to improve its operations and business structure. The IT staff had an opportunity to strengthen IT applications to support multiple plants and a variety of products (Processes: Resource Reconguration). To meet competition, SEMI Corp. altered its product strategy from a single manufacturing service to complete turnkey solutionsfrom wafer package to wafer probe testing, wafer sawing, integrated circuit packaging and nal testing. When the manufacturing processes combined with existing processes, numerous shocks occurred in organizational structure, operational procedures, and information systems. The complex relationships among collaborative companies resulted in complicated procedures of material management (i.e., lot tracking, yield control, cost calculation, and cost apportionment). The specic requirement and continuous changes resulted in the large-scale customization of IT applications and rushed IT replacements (Processes: Resource Reconguration). Adding product variety increased operational complexity and became obstacles to IT implementation. Trial-and-error solutions added additional time. The second IT manager remarked, The implementation of systems follows the development of the company, but why is it so complex? Now we have three factories and when each was constructed, we implemented the IT systems. However, given the vast differences between todays product and the earlier ones, we had to communicate with the other business units and modify the systems again. It was as if we were supporting another company. The rst outsourced MES system still suffered difculties in adapting its functions with the various manufacturing processes in the second TCP factory. However, after applying the MES system to different situations, the staff expanded their knowledge of both applications and manufacturing processes (Processes: Resource Reconguration). In the beginning of the consolidation stage, the outdated alignment increased the complexity and difculty of implementing ERP and MES systems. Because customers demanded real-time data exchange with SEMI Corp., executives altered the organizational structure to maintain closer customer relationships. The IT manager was promoted to an IT director. As a result, the intended

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alignment between executives and the IT director was improved. While the physical IT infrastructure was implemented in prior stages, the alignment between these IT applications and operations was not established until stage III. 4.4. Period IV (20032004): diversication stage After struggling with the shrinking economy, the advantages of providing turnkey solution services had become more obvious. In addition, the cost reduction pressures lead to further integration and mergers among competitors within the value chain. SEMI Corp. acquired several other similar companies and became the worlds largest vendor of wafer packaging. By 2004, the company owned four plants, all located in different countries. Integrating the various processes with disparate IT applications became the new challenge for the IT department. The mergers and diversication strained the rigid IT applications (Positions). The IT staff was responsible for satisfying user requirements as well as maintaining a consistent application infrastructure (Processes: Resource Integration). IT consistency was important for increasing efciency and reducing the workload and maintenance. For users operational efciency was more important than IT efciency. Users considered the broad business goals and were not as concerned with technological-level IT goals. The IT staff suspected many users submitted requests beneting only their functional area, while the users suspected the inconvenience and inefciency of operations was due to the inexibility of IT applications and the unwillingness of IT staff. IT staff and users grew further apart. After the combination of IT staff from the different companies and the reorganization of the IT department, the new IT director recommended replacing existing applications for the exibility and reliability of an international, large package software program (Processes: Resource Acquisition and Elimination). The MES system was outsourced and rebuilt again with a large MES system. SEMI Corp. again considered replacing the ERP system. Yet the question remained: Could a new system escape customization? The packaged IT software had lost exibility and connectivity after the rm began mass customization (Paths). SEMI Corp. invested more capital in IT resources for the system replacement. In addition, the efciency of IT resources depended on the ability of the IT staff. The high turnover rate caused by heavy workloads and arguments with users, meant time and effort was continuously spent on IT training. The implemented alignment from prior stages rapidly declined. 4.5. Case summary Table 3 summarizes the alignment process of SEMI Corp. and presents the changes in IT resources, paths,

processes and alignment states over the lifecycle stages. The position and path dimensions are summarized from prior discussion and the process dimension and alignment states are compiled from both interview data and observations. The emergence of each level was further validated by extensive discussions leading to agreement among the researchers and company respondents. In the pioneering stage, SEMI Corp. was a small company focused on advanced technology and optimistic market growth without concerns for IT management or infrastructure. Their strategy emphasized agility and alignment with the industrial environment. When customers accepted the new products, SEMI Corp. quickly expanded its capacity. During the growth stage, the explicit, intended alignment, aided obtaining the required, tangible IT resources such as databases and IT infrastructure; however, executives did not deliberate upon the linkage between the IT application systems and their production processes. Time-consuming in-house system development and lack of internal expertise led SEMI Corp. to outsource IT. Although the outsourcing strategy could achieve a short-term implemented alignment, the process of internalizing the knowledge of vendors and consultants was lengthy. Both executives and IT managers selected the software and vendors by considering the requirements, nancial budgets, and their own IT abilities in each period. As the business grew, resources were insufcient and making optimized long-term decisions was difcult. SEMI Corp. continuously replaced information systems. For example, the MES were replaced three times in 6 years. In addition, the ERP system had become a distinctive and unique monster as the company moved from mass production to mass customization in 4 years. In the diversication stage, the IT director planned to purchase another large ERP system and the other IT staff did not want to rebuild the system. During rapid growth, the IT staff repeatedly recongured resources to respond to business cycles. The IT department had to maintain the system and the IT system lacked exibility for the company. SEMI Corp. was forced to adopt a dramatic transformation approach and this approach consumed more resources and time than normal. Is the dramatic transformation approach the only option and thus the destiny of a growing organization? 5. Discussion This study applied the dynamic capability perspective in examining alignment between IT strategy and business strategy. The case study approach was used to understand the alignment process evolution with IT resource development and reconguration. It is important to compare the case ndings to prior literature to provide new insights for academicians and IT managers.

Table 3 Summary of SEMI Corp.s alignment process from the dynamic capabilities perspective Expansion (19992000) Consolidation (2001-2002) Diversication (2003-2004)

Stage

Start-up (19971998)

IT resources (positions)

 Isolated applications were   

 Communication and database

 Thirteen IT staff members

 After merging with other  

companies, 30 IT staffs were located in three different sites The second outsourced MES system was implemented There were three different ERP systems in different sites, which would later be replaced

maintained in each separate department Only one IT staff maintained PCs and the network

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infrastructure was built with inappropriate ERP systems An in-house MES system was built for monitoring manufacturing processes, but the system was inefciency and unreliability There were three IT staff in the beginning and six staff at the end of this stage

maintained and customized applications The rst outsourced MES system had been online in the waferbumping factory (the rst site) Regular communication with users and software vendors increased the capacity for application maintenance Efforts focused on mass customization of ERP and MES systems for product expansion. Several custom systems still were nished

 It is easy to get outside

 The neglect of IT in the prior stage

 Inappropriate IS adoption caused 

extra efforts on IS customizations The rst outsourced MES suffered in adapting functions with the different manufacturing processes in TCP factory (the second site)

 The mergers inuenced the

complex and rigid applications, which were previously suitable

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Path dependence and technological opportunities (paths)

resources given the location in the geographical industry cluster

caused IT strategy challenges even with increased nancial support (but was limited by restricted capital). The users resisted the unsuitable applications The system implementation schedule was delayed

Dynamic capabilities (processes)

 The IT staff tried to be 

 The previous isolated applications were

 Applying ERP and MES systems

with different situations led to further knowledge of applications and manufacturing processes (resource reconguration)

 The MES system was outsourced

familiar with the particular manufacturing process of SEMI Corp., and then tried to build a small MES system t the specic internal

replaced by an integrated ERP system (resource acquisition) The IT staff and users learned ERP knowledge from the consultants (resource acquisition)

and rebuilt again with a large MES system. (resource acquisition and elimination) The new IT director urged replacing existing applications for

373

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Table 3 (continued ) Expansion (19992000) Consolidation (2001-2002) Diversication (2003-2004)

Stage

Start-up (19971998)

requirement (resource integration) was outsourced to replace the in-house MES system (resource acquisition)

 A new MES implementation project

the exibility and reliability of international large package software (resource acquisition and elimination)

Development of IT resources platforms and databases Informed buying Relationship building Intention for problem-solving management

 Architecture planning, Sharable      The IT projects were supported with 

larger budgets than previous stage. The executives underestimated the importance of adopting appropriate package systems Technical skills Business understanding Intension for problem-solving IS maintenance and change management Contract facilitation and monitoring

 Architecture planning, Sharable

platform and databases

 Technical skills  Business understanding

   

 Business understanding  IS maintenance and change

Intended alignment

 The executives thought it

 In the beginning of this stage, the

 The executives underestimated the

impact of company mergers on IT infrastructure and lacked emergency measures for this situation

was not necessary to develop integrated applications until needed (intended alignment was low)

out-dated alignment of product strategies increased the complexity and difculty of implementing the ERP and MES systems. The IT manager was promoted to IT director and had the right to attend executive meetings (intended alignment was increased from prior stages)

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Implemented alignment supported moderated information requirements for the rapidly growing organization

 N/A

 The quick-built IT infrastructure

 In the end of this stage, the

applications could fully support the complex material tracking processes under turnkey manufacturing services

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 N/A

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5.1. Lack of alignment limits the development of IT strengths during business growth Prior studies emphasized that intended alignment inuences IT investment effectiveness (Baets, 1996; Byrd et al., 2006; Palmer & Markus, 2000; Tallon, Kraemer, & Gurbaxani, 2000). However, it is difcult to maintain a high level of alignment for a rapidly growing company, particularly when business strategies are vague and changing and as the company seeks an advantageous position within the value chain. The continuously evolving strategies lead to dramatic organization changes and varied IT practices. Aligning IT with the latest business strategy remains challenging. The lack of consideration of the IT department within a growing company causes an unsynchronized alignment. The IT manager prepared IT plans based on the business strategy, but the business strategy has changes. So the implemented alignment may be operationalized as intended but the IT system is no longer appropriate given external events (i.e., changing customer demands, innovative products emerging to replace existing products, shifts in purchasing patterns, changes in raw material costs, shifting to another lifecycle stage earlier than anticipated). The implemented alignment is also outdated because IT managers are often not included in strategic planning meetings or IT managers cannot follow the dynamic pace of changing business strategies. In the expansion stage, SEMI executives began to invest in IT infrastructure. However, the prior neglect of IT led to increased costs and lack of a clear IT strategy. This unsynchronized alignment due to changing strategies points to the importance of timing. Business and IT strategies should have the same planning horizons. Teo and Ang (1999) agree time linkages are emphasized less in IS planning methodologies compared to content linkages. In SEMI Corp., the absence of the IT manager in the strategic business planning processes made alignment and even a common frame of reference between executives and IT managers very difcult. Unsynchronized alignment also strongly inuences the development of IT systems and forces IT managers to follow practices developed during the intended alignment stage of prior periods. Developing appropriate IT is timeconsuming and demands an explicit business strategy. As business strategy shifts, it is difcult to quickly adapt existing IT systems, or develop new IT abilities, for the change in direction. 5.2. Dynamic capabilities were employed for narrowing the gap between intended and implemented alignment In this study, we argue that implemented alignment usually lags intended alignment. We also assert the alignment process employs dynamic capabilities. Thus, the emphasized routines in IT departments are closely related to the targets of IT strategies. In SEMIs expansion stage, most of the developed dynamic capabilities were

resource acquisition routines, reacting to the rapid business growth. In the consolidation stage, IT staff and users applied resource reconguration routines, such as knowledge brokering, resource evolution, and transformation, to adapt existing applications to diverse business processes. In the diversication stage, as SEMI Corp. grew, the elimination of inappropriate applications was essential dynamic capabilities. The linkage with resource acquisition routines increased in importance as SEMI merged with other companies. The intended alignment only indicates the direction of business strategy. The business strategies and organizational changes usually arise from circumstances outside the control of IT department. IT managers use emergent IT strategies to react to their circumstances (Fuller-Love & Cooper, 2000). These emergent IT strategies are supported by dynamic capabilities, which rely on the creation of situation-specic knowledge or are embedded in cumulative, existing knowledge (Eisenhardt & Martin, 2000). Hence, the dynamic capabilities perspective is valuable for analyzing the alignment processespecially for narrowing the gap between intended alignment and implemented alignment. 5.3. The developmental trajectory for IT resources is related to dynamic capabilities In SEMI Corp., the developmental of appropriate IT was closely related to the employment of dynamic capabilities, which are summarized in Table 3. In this case, technical skills and business understanding are related to resource integration routines. These were developed in the start-up stage, followed by architecture planning, informed buying and relationship building related to resource acquisition routines in the expansion stage. As IT applications were established and requirements for IT support increased in the consolidation stage; IS maintenance and change management, intention for problemsolving and contract facilitation and monitoring (related to resource reconguration routines), became important for the extension and integration of IT resources. Because it is challenging to recognize each organizational change in advance, it is important for IT managers to emphasize resource development and the required IT for each lifecycle stage. This also means IT managers should not only focus on specic IT skills but also direct attention to building effective, dynamic capabilities. 5.4. Existing IT resources cause path dependence effects upon it strategies Prior decisions about IT resources affect the formulation of IT strategies. This path dependence in the dynamic capability perspective emphasizes that history does matter. A companys previous investments and existing IT resources constrain future decisions and actions. For

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example, SEMI Corp. utilized poor-quality applications that were compatible with their ERP system. The IT manager made these decisions based on the ease of learning and immediate integration even though they were not the optimal long-term choice. This restricted the scalability of the application systems as well as the business processes. Considering only existing application systems, SEMI Corp. limited their ability to adapt to changing competitive conditions. This illustrates IT strategies are often not the consequence of rational prediction but based on path dependence. Existing IT resources do profoundly affect IT strategies and the alignment process. The literature indicates dynamic capabilities are complicated routines emerging from path-dependent processes (Eisenhardt & Martin, 2000; Teece et al., 1997; Zollo & Winter, 2002). Path dependence could be more accurately described by learning mechanisms, which emphasizes the encoding of inferences from the unique histories of organizations and experiences of managers. However, it also implies new dissimilar competencies and resources are difcult to both develop and implement, largely due to inertia (Lavie, 2006). 5.5. Path dependence effects deteriorate with insufcient resources and lack of a long-term view The prospects of SEMI Corp. were uncertain in the startup stage and the rst IT manager chose simple, isolated application systems partly due to an insufcient budget. However, these IT applications could not be easily modied or arbitrarily abandoned because they ran daily operations. In addition, inappropriate application infrastructures limited viable options, so SEMI Corp. applied shortsighted policies when urgent requirements necessitated immediate changes, even though the resulting effects were often temporary. Although adopting the easy solutions without careful consideration was cheaper and quicker in the short run, it increased the complexity of applications and caused repeated replacements rather than long-term effective usage. As a result, the exibility and efciency of the IT infrastructure declined rapidly. As Reich and Benbasat (2000) agree, IT executives must be committee to IT and the IT managers must understand the business and be committed to the IT mission. Lack of alignment results when executives do not strategically integrate IT within the business. In SEMI Corp., much of the alignment challenges were symptoms of executive managements short-term view. Thus, executive managements dynamic capabilities were lacking. Prahalad and Krishnan (2002) agree the quality of the IT infrastructures in many companies lag behind needs and, as a result, became impediments. Many companies are constrained by legacy infrastructure, including incompatible databases and applications, poor-quality data, and restricted scalability of vendor software modules. From this case study, the results indicate constraints originating

from early, nearsighted IT strategies and path dependence often amplies the effects of insufcient resources. 5.6. Dynamic capabilities decrease path dependence constraints Lacking sufcient internal IT resources or abilities, SEMI Corp. outsourced IT services to acquire needed competencies. This temporarily decreased path dependence, but market forces required rapid resource reconguration. It took time for consultants to train SEMIs IT staff on the packaged systems. In most cases, the staff only implemented the IT resources for their specic function. Additionally, no packaged IT system matched the complex material control processes of the companys turnkey manufacturing services. Thus, the company developed their own material tracking system through learning and utilizing the accumulated knowledge of both IT staff and end users. The moderating factor between IT strategies and IT resources is dynamic capabilities. Dynamic capabilities would eliminate the path-dependence effects caused by existing IT resources. This is why SEMI Corp. could develop and customized a suitable IT system for varied manufacturing processes in the consolidation stage. Path dependence is caused by a limited scope of learning, especially when opportunities for learning are closely linked to previous activities (Teece et al., 1997). Thus, dynamic capabilities for resource reconguration could reduce the side effects of path dependencies. The case indicates dynamic capabilities are not always developed by deliberate strategies. Dynamic capabilities might emerge from actions and experiments (Eisenhardt & Martin, 2000). With the employment of dynamic capabilities, intended alignment and implemented alignment converge to link business strategy with IT strategy. 6. Conclusions Alignment between IT strategy and business strategy is an important indicator of IT effectiveness (Bergeron et al., 2004; Byrd et al., 2006). However, insufcient research has been conducted on achieving and sustaining strategic IT alignment (Hirschheim & Sabherwal, 2001). In this study, the content of strategic IT alignment as intended alignment and implemented alignment is expanded. Moreover, the trajectory between intended alignment and implemented alignment is shown to be linked to the dynamic capabilities of IT resource integration, reconguration, acquisition and elimination. The alignment process is further analyzed from the dynamic capabilities perspective. From a longitudinal case study of a semiconductor company in Taiwan, the results indicate lack of strategic IT alignment impedes the development of IT competency. A long-term view of IT strategy, focused on IT resources with a clear understanding of the overall business vision, would be benecial to link IT resources to the overall development of IT. In addition, dynamic capabilities, emerging

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through learning, integration and transformation processes, positively inuence the alignment process and the achievement of implemented alignment. The results indicate the phenomenon of path dependence, resulting from existing IT resources, is hampered by inappropriate decisions in prior lifecycle stages. With shortsightedness and short-term solutions, path dependence restricts the value of adopting IT and wastes investments in redundant IT resources leading to IT ineffectiveness. The ndings indicate the importance of both a long-term of IT development as well as developing resource reconguration routines concurrent with the alignment processes. This paper has several implications for future research in the area of IT strategy and IT management. For companies with dynamic environments, even with high levels of intended alignment between IT managers and executives, the implemented alignment is not easily realized because the application infrastructures usually follow organizational changes. Thus, it is important to develop dynamic capabilities with continuous adaptations, which are critical for the creation and strengthen of IT resources. Unlike prior studies, which focused on either IT strategy formulation or strategic effects of IT resources, this paper contributes to the strategic information systems literature by providing a holistic view of IT strategy implementation with resource development. Future research is needed develop and execute the farreaching view of intended alignment, including resourceoriented IT strategies or agile application infrastructures. Further research is also needed to examine the conditions inuencing path dependence. Additional case studies and larger, longitudinal samples can conrm these alignment advantages. References
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Ruey-Shun Chen is an associate professor in the Department of Information Management at the China University of Technology in Taiwan. Research interests include IT strategy and planning, enterprise information systems, and strategic information systems. He has published over 20 papers, which have appeared in several leading journals such as Information & Management and European Journal of Operational Research.

Chia-Ming Sun is an assistant professor of the Accounting Department at the National Yunlin University of Science & Technology in Taiwan. He received his Ph.D. in information management from Chiao-Tung University. Research interests include IT strategy and planning, enterprise information systems. He has the industrial background that worked as IS manager and consultant in manufacturing companies.

Marilyn Helms is the Sesquicentennial Endowed Chair and professor of management at Dalton State College in Dalton, Georgia. She holds a doctorate degree from the University of Memphis. She had published extensively on the topics of strategy, quality, and international management. In addition, she writes a monthly column on management issues for the Dalton Daily Citizen newspaper. Her recent research interests include e-commerce, customer service management, and student satisfaction with on-line and hybrid courses.

Wen-Jang (Kenny) Jih is a professor of computer information systems of the Jennings A. Jones College of Business at the Middle Tennessee State University. He obtained his doctorate degree in business computer information systems from the University of North Texas in 1985. His recent research interests include e-commerce, m-commerce, knowledge management, customer relationship management, and innovative instructional methods in information systems.