How do IT capabilities create strategic value? Toward greater integration of insights from reductionistic and holistic approaches

After more than two decades of intensive research, researchers are still struggling to explain the strategic value of information technology (IT) capabilities. The current study suggests that sufficient advancement has not been made in this area of research because of the gap between the richness of theoretical formulations and the minimalism of the reductionistic approach taken to test them. While theoretical formulations describe complex relationships between IT capabilities and competitive advantage, reductionistic explanations rely on models that represent the integration of simple relationships. This area of research can, therefore, benefit from the wider adoption of a holistic approach that attributes competitive advantage to profiles of IT capabilities. This study draws on the resource-based view and configurational theory to develop two reductionistic (direct and mediation) and two holistic (gestalt and profile-deviation) models of IT strategic value. The four models are tested with data collected from IT managers. The empirical analysis illustrates the insights that can be gained by drawing on the relative strengths of reductionistic and holistic explanations of IT strategic value.