IMPACT OF INFORMATION TECHNOLOGY CAPABILITIES ON FIRM PERFORMANCE: UNDERSTANDING THE MEDIATING ROLE OF CORPORATE ENTREPRENEURSHIP IN SMES

Corporate entrepreneurship has a tendency to be influenced by information technology capabilities and considered as an essential source of competitive advantage for the firms that allow exploitation and development of new opportunities. Despite the positive impact of Information Technology (IT) capabilities on firm performance, our knowledge of the processes through which performance outcomes are achieved in a dynamic business environment is not clear. Furthermore, scholars have overlooked the dimensional role of Corporate Entrepreneurship (CE) between IT capabilities and firm performance. This study empirically investigates the indirect role of IT capabilities on firm performance through CE dimensions by surveying 420 manufacturing SMEs of Pakistan. The questionnaire measures IT capabilities (IT infrastructure flexibility and IT integration), corporate entrepreneurship (innovation, business venturing, and strategic renewal) and firm performance. Results of the study show that all hypotheses are significant except the relationship between strategic renewal and firm performance. Furthermore, strategic renewal is not mediating the relationship between IT capabilities and firm performance. The practical implications suggest that CEO's need to develop flexible IT infrastructure and integrate their IT resources to enhance CE activities which are helpful to improve the performance of manufacturing SMEs. These implications are also useful for to policymakers to device business strategies for SMEs.