The role of IT in organizational innovation – A systematic literature review

https://doi.org/10.1016/j.jsis.2021.101696Get rights and content

Highlights

  • We conduct a systematic review of innovation-related research published in the leading IS journals between 2009 and 2020.

  • We synthesize the core theoretical discourses on the role of information technology in innovation.

  • We develop the organizational innovation system (OIS) framework.

  • We outline the research agenda to guide future research on the role of IT in innovation.

Abstract

Information technology (IT) is broadly recognized as an important element in organizational innovation, however there has been relatively little integration of Information Systems (IS) research on the role of IT in organizational innovation. Such integration is particularly important in view of recent calls to examine the evolving ontological nature of IT, wherein IT artifacts are now shaping physical reality. We systematically examine innovation-related literature published in the leading IS journals in the period between 2009 and 2020 and we identify and summarize the core theoretical discourses in this domain. We find that extant literature largely examines the role of IT in innovation at a high level of abstraction, focusing on IT investments and IT capabilities, and consequently precluding granular insights on who, what, when, where, how, and why in relation to organizational innovation. To address this limitation and to provide a structuring lens for future research, we develop the organizational innovation system framework which posits that actors, IT artifacts, actions and organizational context are the key elements in organizational innovation systems that require more granular examination to yield deeper insights on how information technology contributes to organizational innovation. We re-examine the literature through the organizational innovation system lens and we identify gaps in extant research. We also outline potential directions for expanding the scope of future research.

Introduction

Organizational innovation, defined as the design, invention, development and/or implementation of new or altered products, services, processes, systems, organizational structures, or business models (Joshi et al., 2010), has been long recognized as an essential element of business strategy (Croteau and Bergeron, 2001, Schumpeter, 1934, Yoo et al., 2010). Information technology plays an important role in supporting innovation within organizations (Nambisan et al., 2014), as well as being a component of innovative product (Yoo et al., 2010) and service offerings (Lusch and Nambisan, 2015), and a conduit into new markets (Ping et al., 2015). While there is a growing body of literature examining the role of technology in supporting and enabling innovation across different organizational settings, there has been relatively little theoretical integration of research within this domain (Garcia and Calantone, 2002, Kohli and Melville, 2019).

Theoretical integration of extant research is a critical step in advancing theory development (Rivard, 2020, Rivard, 2014). The current effort is motivated by the following factors. First, there are several strands of organizational innovation-related research in Information Systems that evolved in parallel without integration across them. IT/business alignment, resource and capabilities-based perspectives, and business model innovation related research approach innovation from different theoretical foundations. Whereas research based on the resource-based view commonly focuses on IT resources (Havakhor et al., 2019, Steelman et al., 2019), capabilities-based studies examine how managers are able to leverage IT resources (Nwankpa et al., 2017, Ravichandran et al., 2017a, Ravichandran et al., 2017b), confounding the effects of IT resources and managerial actions. IT/business alignment research narrows the focus of inquiry to evaluating the alignment without explicit focus on either IT resources or managerial actions (Queiroz et al., 2020, Street et al., 2018). Business model innovation research has largely treated IT systems as the context, focusing primarily on the governance and pricing issues related to IT-enabled platform business models (Lin et al., 2011, Song et al., 2018).

There has been little integration of recent insights across the different theoretical streams. Kohli and Melville (2019) reviewed studies published prior to 2010 and concluded that much of the literature on IT-enabled innovation focused on internal organizational processes related to IT innovation development and implementation, while much less had been published on initiation of innovation efforts, commercialization of innovations, or the role of external environment in innovation. To the best of our knowledge, there has not been a systematic integration of literature on the role of IT in innovation published since 2010.

The second motivation for the current review is the need to reassess the evolution of research on the role of IT in organizational innovation published since 2010 because of the growing transformative role of IT in innovation (Baskerville et al., 2020). Novel technologies are increasingly playing a generative role shaping physical reality across different contexts that include business process automation enabled by artificial intelligence (AI) technologies (Baskerville et al., 2020), as well as AI-driven innovation that fundamentally reshape the role of information technology in innovation (Belhadi et al., 2021, Makowski and Kajikawa, 2021). Hence, there is a need to reassess and synthesize what is known about the role of IT in organizational innovation and identify directions for future research. This is echoed by Information Systems scholars who repeatedly noted that technology-enabled innovation is an important focal area for Information Systems (Nambisan et al., 2020, Nambisan et al., 2017).

Integration of research on the role of information technology in innovation also has value for practitioners. The question of how firms can leverage information technology for innovation remains a challenge in practice. For example, artificial intelligence is the latest type of IT that promises to transform many industries (Davenport et al., 2020). IDC reports that firms committed over $50 billion to AI investments in 2020 (IDC, 2020) and investment is expected to grow to $110 billion by 2024. However, a recent survey of 3,000 executives conducted by Boston Consulting Group revealed that only 10% of the firms were able to realize a positive return from investments in artificial intelligence (Ransbotham et al., 2020). A synthesis of literature will help practitioners better understand how IT can contribute to innovation within organizations.

The following research questions guide our effort. RQ1: Which theoretical perspectives are used to examine the role of IT in innovation at the organization-level of analysis in Information Systems? RQ2: What are the focal IT and innovation-related constructs in innovation research at the organization-level of analysis in Information Systems and how do they inform our knowledge about actors, activities, artifacts and organizational factors involved in organizational innovation systems? RQ3: Where are gaps in extant literature from the organizational innovation system perspective and where are the most promising avenues for expanding the scope of research in this domain?

To address our research questions, we conduct a systematic literature review (Okoli, 2015, Paré et al., 2015, Webster and Watson, 2002) and synthesize the key theoretical discourses in Information Systems on the role of information technology in innovation at the organization-level of analysis. We focus our analysis on studies published in the senior scholars’ basket of Information Systems (IS) journals in the twelve-year period that spans 2009–2020. These journals emphasize theoretical contribution as the key requirement for publication (Ågerfalk, 2014, Leidner, 2020) and therefore they serve as an appropriate lens into the core theoretical discourses on the role of information technology in innovation in Information Systems.

We find that much of the extant research is developed on a narrow theoretical foundation of resource-based view (RBV) and capabilities literature. Published studies are typically executed at a high level of abstraction and shed little light on the key actors, activities, or IT artifacts and their role in organizational innovation. Therefore, the key questions of who, what, when, where, how, and why in relation to the role of information technology in organizational innovation remain largely open.

To address the need for a more granular view on the key IT-related factors that influence organizational innovation, we draw on innovation systems literature (Granstrand and Holgersson, 2020) and we develop the organizational innovation system (OIS) framework. The OIS framework posits that actors, activities, artifacts, and organizational factors are the key constituent components of an organizational innovation system. OIS serves a theoretical lens that can frame future research and yield deeper, more nuanced, and more practice-relevant insights on the role of information technology in organizational innovation. The OIS framework serves as an analysis-level theory (Gregor, 2006) and it focuses researchers’ attention on the need to understand how information technology affects and is affected by actors, activities, organizational factors, and how it ultimately affects organizational innovation. We reexamine the extant research through the OIS lens and we outline the opportunities for future research.

Our study makes a number of contributions to theory and practice. First, we offer a synthesis of the core theoretical discourses in extant literature on the role of IT in organizational innovation. Second, we develop the organizational innovation system framework as an integrative theoretical lens on the role of information technology in organizational innovation. OIS lays the foundation for mid-range theory development to begin to address questions of who, what, when, where, how, and why contribute to successful organizational innovation (Gregor, 2006, Whetten, 1989). Third, we identify the key actors, artifacts, actions and organizational context factors that have been examined in prior research and we provide a summary of known effects. Fourth, we outline gaps in extant knowledge and we also delineate directions for expanding the scope of research on the role of information technology in innovation.

The remainder of the manuscript is structured as follows. In the next section, we provide an overview of organizational innovation and innovation system related research that guides the framing of our analysis. In the section that follows, we discuss the methodological approach underlying the selection and evaluation of the studies included in this review. In the next section, we present the analysis of the selected literature. We conclude with a discussion of the gaps in the current literature and potential future directions for impactful research.

Section snippets

Innovation and innovation types

Our work focuses on the organization-level of analysis of innovation because businesses are the primary vehicles for developing and commercializing innovations. Globally, businesses spend an estimated $1.7 trillion dollars on research and development annually (OECD, 2021). To understand how information technology can affect innovation at the organization-level we adopt the Joshi et al., (2010) definition of organizational innovation as the “design, invention, development and/or implementation

Methodology

Literature reviews play a critical role in theory development (Murungi and Hirschheim, 2021, Paré et al., 2015, Rowe, 2014). In developing this literature review, we follow the guidelines in (Webster and Watson, 2002) that outline the following steps in a systematic literature review process: 1) motivate the research topic, 2) describe the key concepts, 3) delineate the boundaries of research, 4) review prior literature, 5) present results, 6) develop a model for future research, 7) discuss

Theoretical perspectives on the role of IT in innovation

In the first step of the analysis, we examined theoretical perspectives and focal IT and innovation-related constructs in the manuscripts published in the basket of eight senior scholars’ Information Systems journals. We find that studies focusing on innovation as an outcome generally follow a very different blueprint when compared to studies focusing on innovation as a process. Whereas outcome-focused studies tend to present empirical evaluation of elaborations on the established theories,

Dominant theories and their limitations

In our analysis of the dominant theories in our sample, we find that resource-based view and capabilities theories are the most cited theoretical frameworks in Information Systems research focused on innovation. RBV argues that rare, valuable, hard to imitate and to substitute resources offer a competitive advantage to the firms that possess them (Barney, 1995, Barney et al., 2011). The capabilities literature builds on RBV and posits that it is not just the resources, but rather what

Contribution to theory

Our study makes a number of contributions to theory. First, while the role of information technology in organizational innovation is broadly recognized (Nambisan et al., 2020a, Nambisan et al., 2014, Yoo et al., 2010), research in this domain evolved in several parallel streams without substantial integration across them. The most recent review on the role of information technology in organizational innovation focused on literature published prior to 2010 (Kohli and Melville, 2019).

Limitations

No research is without limitations and we need to note several limitations in this literature review as well. Due to the overwhelming volume of research on innovation, we focused our review only on the top eight Information Systems journals. While these journals emphasize theoretical contribution as the key consideration for publishing and typically represent a good sampling frame for the current theoretical discourses in Information Systems, we cannot exclude the possibility that we may have

Conclusion

This literature review was motivated by a relatively abundant body of research on the role of IT in innovation across several theoretical streams, but limited integration of published research in this field. To address the lack of integration in this domain, we conducted a systematic literature review and we examined innovation-related research published in the leading Information Systems Journals in the period between 2009 and 2020. We find that studies in our sample of IS manuscripts are

Declaration of Competing Interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgement

This research was supported by a grant from the Smart Family Foundation of New York.We would like to thank Dr. Tuunainen and Dr. Rivard, as well as two anonymous reviewers for their guidance and suggestions during the review process. The input we received was instrumental in developing the manuscript.

References (220)

  • A.-M. Croteau et al.

    An information technology trilogy: business strategy, technological deployment and organizational performance

    J. Strateg. Inf. Syst.

    (2001)
  • M. Cui et al.

    Strategy, Resource Orchestration and E-commerce Enabled Social Innovation in Rural China

    J. Strateg. Inf. Syst.

    (2017)
  • P. D’Este et al.

    Fostering novelty while reducing failure: Balancing the twin challenges of product innovation

    Technol. Forecast. Soc. Change

    (2016)
  • E.M. Daniel et al.

    A dynamic capabilities perspective of IS project portfolio management

    J. Strateg. Inf. Syst.

    (2014)
  • F.X. De Vaujany et al.

    Moving closer to the fabric of organizing visions: The case of a trade show

    J. Strateg. Inf. Syst.

    (2013)
  • J. Dhaliwal et al.

    Alignment within the software development unit: Assessing structural and relational dimensions between developers and testers

    J. Strateg. Inf. Syst.

    (2011)
  • N.F. Doherty et al.

    The role of IS capabilities in delivering sustainable improvements to competitive positioning

    J. Strateg. Inf. Syst.

    (2009)
  • J.Q. Dong et al.

    Business value of social media technologies: Evidence from online user innovation communities

    J. Strateg. Inf. Syst.

    (2015)
  • W. Du et al.

    Affordances, experimentation and actualization of FinTech: A blockchain implementation study

    J. Strateg. Inf. Syst.

    (2019)
  • T. Felin et al.

    Closed or open innovation? Problem solving and the governance choice

    Res. Policy

    (2014)
  • R. Garcia et al.

    A critical look at technological innovation typology and innovativeness: a literature review

    J. Prod. Innov. Manag.

    (2002)
  • J.W. Gu et al.

    The effects of IS resources, capabilities, and qualities on organizational performance: An integrated approach

    Inf. Manag.

    (2013)
  • S. Haus-Reve et al.

    Does combining different types of collaboration always benefit firms? Collaboration, complementarity and product innovation in Norway

    Res. Policy

    (2019)
  • R.L. Ackoff

    Towards a system of systems concepts

    Manage. Sci.

    (1971)
  • R. Adams et al.

    Innovation management measurement: A review

    Int. J. Manag. Rev.

    (2006)
  • P.J. Ågerfalk

    Insufficient theoretical contribution: A conclusive rationale for rejection?

    Eur. J. Inf. Syst.

    (2014)
  • A.S. Alexiev et al.

    The Moderating Role of Tangibility in Synchronous Innovation in Services

    J. Prod. Innov. Manag.

    (2018)
  • Alphabet, 2020. Alphabet Annual Report...
  • Amazon, 2020. Amazon Annual Report...
  • N. Anderson et al.

    Innovation and Creativity in Organizations: A State-of-the-Science Review, Prospective Commentary, and Guiding Framework

    J. Manage.

    (2014)
  • N.R. Anderson et al.

    Measuring climate for work group innovation: development and validation of the team climate inventory

    J. Organ. Behav. Int. J. Ind. Occup. Organ. Psychol. Behav.

    (1998)
  • M. Avital et al.

    From generative fit to generative capacity: Exploring an emerging dimension of information systems design and task performance

    Inf. Syst. J.

    (2009)
  • S.B. Bacharach

    Organizational theories: Some criteria for evaluation

    Acad. Manag. Rev.

    (1989)
  • I. Bardhan et al.

    Research Note—Business Value of Information Technology: Testing the Interaction Effect of IT and R&D on Tobin’s Q

    Inf. Syst. Res.

    (2013)
  • J. Barney

    Information Technology and Sustained Competitive Advantage: A Analysis IT and Competitive Advantage

    MIS Q.

    (1995)
  • J.B. Barney et al.

    The future of resource-based theory: Revitalization or decline?

    J. Manage.

    (2011)
  • A. Barua et al.

    Reexamining the market value of information technology events

    Inf. Syst. Res.

    (2018)
  • R.L. Baskerville et al.

    Digital First: The Ontological Reversal and New Challenges for Information Systems Research

    MIS Q.

    (2020)
  • A. Belhadi et al.

    Artificial intelligence-driven innovation for enhancing supply chain resilience and performance under the effect of supply chain dynamism: an empirical investigation

    Ann. Oper. Res.

    (2021)
  • J. Benitez-Amado et al.

    Information technology, the organizational capability of proactive corporate environmental strategy and firm performance: A resource-based analysis

    Eur. J. Inf. Syst.

    (2012)
  • L. van Bertalanffy

    General system theory: Foundations, development, applications (revised.)

    (1968)
  • J. Bessant et al.

    Putting supply chain learning into practice

    Int. J. Oper. Prod. Manag.

    (2003)
  • M. Bogers et al.

    Strategic Management of Open Innovation: A Dynamic Capabilities Perspective

    Calif. Manage. Rev.

    (2019)
  • M. Bogers et al.

    The open innovation research landscape: established perspectives and emerging themes across different levels of analysis

    Ind. Innov.

    (2017)
  • R.P. Bostrom et al.

    MIS problems and failures: A socio-technical perspective. Part I: The causes

    MIS Q.

    (1977)
  • R.P. Bostrom et al.

    MIS Problems and Failures: A Socio-Technical Perspective Part II: The Application of Socio-Technical Theory

    MIS Q.

    (1977)
  • S. Breschi et al.

    Sectoral innovation systems: technological regimes, Schumpeterian dynamics, and spatial boundaries

    Syst. Innov. Technol. institutions Organ.

    (1997)
  • T. Büschgens et al.

    Organizational culture and innovation: A meta-analytic review

    J. Prod. Innov. Manag.

    (2013)
  • N.G. Carr

    IT doesn’t matter

    Educ. Rev.

    (2003)
  • S. Chatterjee et al.

    The nonlinear influence of harmonious information technology affordance on organisational innovation

    Inf. Syst. J.

    (2021)
  • Cited by (20)

    • Evolving strategic IS themes

      2024, Journal of Strategic Information Systems
    • The role of informal institutions in the relationship between innovation and organisational learning in export performance: A bidirectional relation?

      2023, Asia Pacific Management Review
      Citation Excerpt :

      This condition is due to the flow of knowledge, information, and production networks in the current globalization process (Safari, Saleh, & Al Ismail, 2021; Yan et al., 2021). This process will facilitate entry into new markets, enabling innovators to face high risks in adaptation processes (Aghazadeh, Abadi, & Zandi, 2022; Mamonov & Peterson, 2021). On the other hand, international competition will generate efficiency in innovation activities (Kijek & Kijek, 2019).

    • How big data analytics enables the alliance relationship stability of contract farming in the age of digital transformation

      2022, Information and Management
      Citation Excerpt :

      The widespread use of big data analytics provides companies with more opportunities to discover hidden patterns, associations, segmentations, and other insights from big data sets [12,31]. This brings opportunities for enterprises to improve products/services, optimize management and operations [28], improve and innovate business models, and enhance organizational competitive advantages [33,46]. Recent work has shifted from an internal focus to examining the role of big data analytics technology in external partnerships in supply chains [12,32,36,66].

    View all citing articles on Scopus
    View full text