Perception of IT leadership and IT capability for competitive advantage in the Swiss financial sector

Perception of IT leadership and IT capability for competitive advantage in the Swiss financial sector

The financial industry is currently suffering considerably from an economic crisis. This is particularly true for the Swiss financial sector. In this context, Information
Technology (IT) organisations of those financial firms are under enormous pressure since IT intensity and investments into IT remain high while the economic values gained from those IT investments are often questionable. IT can no longer just increase productivity, but must focus on truly supporting the dynamic business of this sector in order to create sustained competitive advantage. Furthermore, qualitative and quantitative studies indicate that the Swiss financial sector with its high IT intensity might suffer from insufficient IT (support) services and a lack of qualified IT staff. Based on literature about leadership n IT, the sector would profit from providing more systematic investment aimed at improving leadership in
technology delivery.

Research indicates that, in the Swiss financial sector, some firms might have managed to improve their performances by creating and applying strategic IT and IT leadership capabilities. By researching the question to what extent transformational/transactional leadership and elements of IT capability are related to firm performance in IT organisations of companies of the Swiss financial sector, this study generates practical knowledge which IT and business managers of the respective firms can use to shape their strategies and operations. Moreover, the study contributes to the literature in several ways, including demonstrating how leadership theory could interact with other strategic IT capabilities in light of the resource-based view (RBV) of the firm.

By using two surveys, this study collected and analysed data from 45 Swiss financial firms, including 182 data sets from IT staff on their perception of the leadership behaviours of their superiors and 217 data sets from business managers on their perception of strategic IT capabilities and resulting firm performance gains. The study found transactional and transformational leadership do not directly impact firm performance measured as a combination of internal operating performance and external market-oriented performance. However, the study results suggest that transformational leadership partially moderates the effect of IT-enabled organisational intangibles on firm performance, while no significant mediating effect of IT capability (between leadership and firm performance) was found. As hypothesised, physical IT infrastructure and IT-enabled organisational intangibles were found to be positively related to firm performance. In contrast to this, the results did not support a significant relationship between human IT capital and firm
performance. However, the data analysis indicated that skills other than technical and managerial might have become more important, for example abilities that are related to business and IT alignment.

Implications for managerial practice include that well-chosen combinations of elements of physical IT infrastructure and IT-organisational intangibles might
provide Swiss financial firms with more business value whenever firms manage to use them as capabilities that aim at supporting innovation in and flexibility of the business. The results also indicate that the management of Swiss financial firms might want to carefully shape and monitor the degree of IT infrastructure integration, as too much integration could potentially limit flexibility.

In addition, findings suggest that business managers might need to focus more on developing IT-enabled intangibles, together with transformational leadership. Furthermore, results compared with literature imply that organisational learning, entrepreneurial ability and organisational culture might play significant roles in shaping the organisational routines used to create and apply valuable strategic capabilities from IT and leadership. Finally, results propose that Swiss financial firms which now rely more on internal IT might benefit from more outsourcing,
subject to this being managed in a professional and careful way.