Assessing the Relationship Between IT Capabilities and Performance: A Study in Banking Industry of Bangladesh

Abstract

In every economic system banking institutions play important role to accelerate the growth of economy. As the advancement of IT is incredibly increase day by day so it is necessary to assess the impact of IT capabilities on the performance of banking activities. This study demonstrates the relationship between IT capabilities and performance of bank in Bangladesh. The sample size of the study was 15 commercial banks which were randomly selected from the listed commercial banks of Dhaka Stock Exchange. A structured questionnaire was asked to key personnel of selected banks to achieve research objectives.  After examining previous studies it was identified that IT capabilities has mixed relationship with firm performance. The study has taken  process oriented dynamic capabilities (PDC)  to identify the relationship between IT and performance of banks and treat business processes of bank as mediating factors between IT capabilities and bank performance. Here collective effects of IT Capabilities at both the process level and the firm level are examined. To measure the performance at firm level the study has taken Balance Score Card (BSC) method which considers all perspectives to evaluate performance. Study result shows that IT capabilities have significant positive impact on the business process level of bank which in turn positively impact on the performance of bank. Among the components of IT capabilities, IT management capabilities and IT personnel skills have insignificant effect on IT infrastructure flexibility. However, IT personnel skills have statistically significant effect on IT management skills. The major findings of the study facilitate banking organization to understand that IT improves business performance through process improvements which are considered as mediating factors.

Keywords: IT Capabilities, Process Oriented Dynamic Capabilities (PDC), Balance Score Card, Mediating Factors, Business Process.